Markets seem to be in a state of confusion, as positive news and data is offset by just as many negative factors. Some investors feel that 2012 will continue to see its nice rally, as this past month was the best January for equities since 1997. Others think that the fun is over as a number of potential issues have begun to rear their head. One of the most disturbing bits of news is the potential for Standard & Poor’s to downgrade U.S. debts once again. Though it is merely speculation at this point, another downgrade would likely erase all of the progress we have made since August of last year [see also ETFs For The Capital Preservationist].
For now, investors will have their attention fixated on Fed Chairman Ben Bernanke, as he testifies before Congress on the state of the economy later today. “The appearance will come just a week after the U.S. central bank’s announcement that it is likely to keep interest rates near zero for nearly three more years, a decision that may prove controversial with some Republicans” writes Reuters. With a number of congressmen opposed to the Fed’s current actions, Bernanke will certainly be grilled about the Fed’s plans for the future, as well as a more detailed outline for the future of interest rates, which have been frozen near zero for quite some time.
The testimony, which will come at 10 a.m. EST, will likely encompass varying aspects of our economy, as Bernanke is expected to be asked “to assess the state of the U.S. recovery, the central challenges facing American fiscal policy, the economic impact of Europe’s economic and political struggles, and the Fed’s recent conduct of monetary policy” writes John Shaw. As many know, when Bernanke testifies or makes a speech, markets are quick to react. Gold, in particular, is prone to big moves based on Bernanke’s comments, as traders take cues from the chairman on where the precious metal will be headed in days to come [see also Three Reasons Why Gold Is Overvalued].
In light of this, today’s ETF to watch will be the COMEX Gold Trust (IAU). IAU is a physically-backed gold product which charges 25 basis points in comparison to GLD’s 40 [see our GLD-Free Gold Bug ETFdb Portfolio]. This cost cutting strategy has been helping IAU to gain more assets than its competitor, though it is still substantially smaller when all is said and done. Look for comments on monetary policy and the impact of European woes to be big movers for gold today as well as in the coming trading sessions. With the testimony coming an hour after markets open, investors with strong opinions on the event have time to hop into this ETF and potentially profit from its subsequent move [see also Cost Competition: Inflows Surge For Cheap ETFs].
Disclosure: No positions at time of writing.