Gold ETFs Look For Mean Reversion

Gold exchange traded products, including the SPDR Gold Shares (NYSEArca:GLD), enjoyed solid showings last week. GLD, the world’s largest gold exchange traded product climbed about 2.1%, aided by a still weak dollar.

Gold miners ETFs joined the party as well. For instance, the VanEck Vectors Gold Miners ETF (NYSEArca:GDX), the largest gold miners ETF, gained nearly 4% last week.

The dollar has been one of the worst-performing developed market currencies this year, which has been an assist to gold at various points during the year. However, some currency traders believe the dollar can rebound. While that could be seen as a stumbling block to gold, there are ways for investors to prosper with the yellow metal even if the dollar rallies.

“While dollar weakness and falling US rates are primary drivers, on the other hand, ETF outflows have continued and US equity index levels continue to reach new highs. This points us to the fact that the gold market is walking a fine line, balancing a number of weakening macro headwinds and gold-positive uncertainty,” according to a note from RBC Capital Markets posted by Crystal Kim of Barron’s.

GDX’s rebound could be a positive sign after the recent weakness experienced by gold mining stocks, but investors should remember this can be a volatile industry and some market observers believe gold miners will remain volatile for the foreseeable future.