Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) were stellar performers in July. That trio of gold ETFs each gained about 4.5% last month and some market observer believe the yellow metal can continue trending higher.
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.
Louise Yamada of Louise Yamada Technical Research Advisors said in an interview with CNBC that “$1,400, however, would be key resistance because that goes all the way back to 2014, which would be about a four-year base.”
“Gold and equities move inversely, so if gold continues up here it’s probably possible that we move more into a corrective trend in equities as gold rallies up,” Yamada said in the CNBC interview. “There’s a lot here that suggest that equities are looking a little fragile under the surface, and it would be logical that you would see equities pull back a little or consolidate.”
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.
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.