ETFs Need Gold to Break This Price…Or Else
New York (Oct 8) While that does not sound like bad news, it could prove to be if bullion does not soon break through the $1,150 per ounce area.
Dragging on the gold market, volatility is beginning to ease after markets try to recover from the swift correction – gold is seen as a safe-haven asset that provides a good store of wealth during tumultuous market conditions. Additionally, the U.S. dollar is beginning to strengthen against foreign currencies – gold is priced in USD, so further buying becomes pricier for foreign investors. [Safe-Haven Demand, Dovish Fed Help Gold ETFs Regain Ground]
Additionally, gold is seeing greater support from safe-haven demand after currency devaluations across Asia added to investment demand for a better store of value than paper currencies or stocks and bonds. Bullion was recovering lost ground after dropping to a five-year low last month on concerns that the Fed would hike rates as early as September. Obviously, a rate hike for 2015 can now only happen in October or December.
“”We’ve seen a long downtrend in gold and it looks to me that it could be coming to an end,” Carter Worth said Friday on CNBC’s “Options Action.” Gold has been in a precipitous decline since 2011, down 4 percent in 2015 and on track for its longest yearly losing streak since 1997,” reports CNBC.
Gold has been in a 2-year bear market, which has seen failed rallies on the back of various news events. Continued strength in the US economy and labor market has offset political and economic events since the Gold market turned bearish in 2013.
“A failure to break $1150 could hence prove deadly for the remaining year,” says one bullion bank’s sales desk of the gold price, now “waiting and watching for a decisive break,” reports Bullion Vault.
The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have each gained more than 2% over the past month.
“If gold conclusively breaks $1150 and holds above,” adds David Govett at London brokers Marex Spectron, “then we may see…$1175, but I don’t see the price moving much higher than that,” according to Bullion Vault.