Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), have been impressive performers throughout the summer and lingering macro catalysts could push bullion even higher in the weeks ahead.
The ongoing political drama in the U.S. has also weighed on the U.S. dollar, which helped support the gold outlook. With traders remaining skeptical that this week’s Federal Reserve meeting would do much to alter the recent weakness, gold has maintained its recent strength. The dollar is one of the worst-performing major currencies in the world this year.
“Since skimming the $115 level in early July, the SPDR Gold Trust (GLD) has surged more than 11% to trade at $127.98,” reports Schaeffer’s Investment Research. “Boosting the exchange-traded fund (ETF) has been diminished expectations for a Fed rate hike by year’s end, as well as rising geopolitical tensions with North Korea. Against this backdrop, there’s been an extreme demand for GLD calls. In fact, the 10-day moving average for GLD’s out-of-the-money put/call skew hit 0.80 on Aug. 23 — its lowest reading on record, according to Schaeffer’s Quantitative Analyst Chris Prybal — and closed last night at 0.84.”
Still, there has been plenty of put activity in GLD options, too.
“That’s not to say put traders have been absent on GLD, though. Put open interest is currently docked in the 96th annual percentile, with 1.2 million contracts open. Plus, GLD’s Schaeffer’s put/call open interest ratio (SOIR) of 0.57 is in the 100th annual percentile, meaning traders have rarely been more put-skewed toward options set to expire in three months or less. Peak put open interest of 39,776 contracts is found at the September 115 strike, though it’s unclear whether they were bought or sold,” according to Schaeffer’s.
For the week ended Sept. 7th, GLD added nearly $873 million in new assets, a total surpassed by just four other ETFs. Investors added more than $1 billion to GLD in August.
The good news for gold ETFs is that inflation could serve as a catalyst for the yellow metal. Rising inflation could also prove to be a catalyst for gold ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter.
Tom Lydon’s clients own shares of GLD.