Bullish on Bullion: More Upside For Gold?

Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), the largest exchange traded product backed by holdings of physical gold, nudged higher last week and some industry observers believe the yellow metal is poised to deliver more upside.

Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.

Moreover, in the face of a stronger dollar and speculation that the Federal Reserve could raise interest rates over the mid- and long-term, gold prices could still move modestly higher with some help from increased demand out of the emerging markets, namely China and India.

“Lower-for-longer interest rates have fueled bubbles in the stock, real-estate and even art markets as investors seek out higher returns, McEwen Mining Inc. Chief Executive Officer Rob McEwen said. While conventional wisdom is that a return to higher rates would make interest-bearing assets more attractive, he said gold should become more appealing as markets re-calibrate,” reports Bloomberg.

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