Revenge of the Gold Bugs: Gold ETF Notches 5% Weekly Advance, Biggest Since 2013

San Francisco (Feb 5)  While stocks were plunging on Friday, the biggest gold exchange-traded fund closed out its biggest weekly advance in 2 1/2 years.

The SPDR Gold Shares (GLD) added 1.6% to $112.32 on Friday, capping a 5.02% weekly advance that was the biggest since July 2013 (taper tantrum), when it rose 5.11%. Before then, you need to go all the way back to October 2011, when GLD added 6.3%. Gold futures finished the week up 3.7% at $1,157.80, while silver futures rose 3.8%.

The Central Fund of Canada (CEF), a closed-end fund that owns both gold and silver, ended the week up 6.9%. This CEF recently traded at a 7.8% discount to its NAV.

Gold prices finished 2015 near a six-year low and down more than 40% since 2011′s all-time high. But each passing day in 2016 seems to turn market watchers bullish. Some fund managers are calling for  a “mega short squeeze.” Gold-focused exchange-traded funds have already taken in $2.3 billion in 2016, according to XTF, including inflows for the ETFS Physical Swiss Gold Shares (SGOL), iShares Gold Trust (IAU) and Van Eck Merk Gold Trust (OUNZ).

Tony Welch, ETF strategist at Ned Davis Research, told clients on Friday that gold is “getting a tailwind from a weak dollar.” He noted that the PowerShares DB US Dollar Index Bullish Fund (UUP) recently crashed through a three-month technical support level and hasn’t shown signs of turning around. Gold is priced in dollars and so becomes less expensive to overseas buyers when the greenback weakens. Weak economic data in recent weeks makes the likelihood of a Federal Reserve interest rate increase less likely by the day, which softens the dollar. Still, the technical readings, he says, make gold’s strength “more of a trade than a trend at this point.”

Gold miners also surged. The Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDXJ) were up 20% and 14%, respectively.

Source: Barrons