Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Find Out if Gold ETFs Are at Risk
News
Share

Find Out if Gold ETFs Are at Risk

Stoyan BojinovNov 19, 2015
2015-11-19

The precious yellow metal has evaded the headlines in recent weeks, although it may warrant a closer look as the charts appear to be aligning for those looking to bet on a potential reversal in gold prices.

Granted, gold has been hated for more than three years now, but some investors can’t help but feel enticed by the discounted prices. However, a closer look at what’s really driving the metal may reaffirm the market’s opinion on the matter; that is, the trend remains down for gold prices.

What Fundamental Factors Are Driving Gold Prices Today

Inflationary Expectations

This is perhaps the single biggest driver of gold prices – especially so today. The last labor market report indicated a pickup in wage growth, which often is a leading sign of inflation creeping up. As one would expect, this raised Fed rate hike fears, which ultimately pulled the U.S. dollar higher and gold lower. The stage now is set for the Fed to start tightening, which would likely work against any near-term reversal in gold prices.

Safe-Haven Demand

In the right environment, gold’s safe-haven appeal may supersede inflationary expectations when it comes to key price drivers. One would think that after such a steep sell-off and gold prices now trading around major lows, the terrorist attacks in Paris would have pushed investors’ fear buttons more. However, against the bulls’ expectations, gold prices didn’t do much after the tragedy.

See ETF Surprises After Paris Attacks

Foreign Central Bank Policy

It’s not just moves in the U.S. dollar that impact gold prices; foreign central bank policy also should be carefully considered when analyzing the fundamental landscape. Currently, the odds are stacked against gold; that is to say, major central banks, including the ECB, BoJ and PBOC, still are very entrenched in “easing mode,” and that is because inflationary expectations overseas remain weak. In turn, this decreases gold’s potential utility as an inflation-fighting investment.

Consumer Demand

Consumer demand is not really a key price driver and this factor isn’t really in focus right now. Perhaps the one thing to consider is that slowing economic growth in China and India is a clear headwind; likewise, any signs of this changing could be positive for the precious yellow metal.

Gold still is facing more headwinds than tailwinds as not much has changed for the precious metal over the last year from a fundamental perspective. This, of course, suggests that any future price appreciation may be short-lived as the underlying factors driving the price of gold haven’t aligned for the bulls just yet.

Let’s move on to what the charts are saying.


Content continues below advertisement

Technical Analysis: Gold ETF (GLD)

Consider the weekly chart for the SPDR Gold Trust (GLD A-) since inception below:

gld weekly chart

Takeaways:

  • Since peaking in the second half of 2011, GLD has remained in a downtrend (blue channel) as evidenced by lower-highs and lower-lows.
  • On an encouraging note, this ETF is nearing a significant price level around the $100 mark (red line), formerly resistance, which now might serve as major support.

Technical Analysis: Gold Miners (GDX)

Consider the weekly chart for the Gold Miners ETF (GDX B+) since inception below:

gdx weekly chart

Takeaways:

  • Gold miners peaked in 2011 alongside gold, and have since remained in a downtrend (blue channel) as well; although it’s worth mentioning that GDX had been topping out for a lot longer than GLD.
  • Recently, GDX has been able to trade along a support level (red line), with big volume, which certainly is encouraging; let’s not forget this ETF is trading in uncharted “low territory.”

Ways to Play Gold

Investors have a number of choices when it comes to profiting from a move in gold prices:

  • See All Gold ETFs
  • See All Gold Miners ETFs
  • See All Gold Explorers ETFs

Also be sure to read the 50 Ways to Invest in Gold.

The Bottom Line

If you are tempted to trade the potential reversal setup in gold and gold miners ETFs, do so with caution; as the technical analysis above suggests, this precious metal remains in a long-term downtrend with additional fundamental headwinds. For nimble traders, establishing a long position in gold-related ETFs at current levels may provide an ample risk-reward ratio should the Fed deliver a “no rate hike” surprise at its next meeting in December.

Follow me @SBojinov

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

» Popular Pages

  • Tickers
  • Articles

Jun 24

As Inflation Rises, Try Equal Weighting Equity Holdings

Jun 24

Cybersecurity Investments Could be an Opportunity

Jun 24

Diversifying During Rate Hikes With a Real Estate ETF

Jun 24

Don't Ever Bet Against the S&P 500

Jun 24

Have We Reached Rock Bottom?

Jun 24

Coinbase Poised to Launch Derivatives Product

Jun 24

Any Time is the Right Time to Begin Investing

Jun 24

American Century’s Sandra Testani

Jun 24

Exxon Demands Higher Carbon Tax: This Fund Benefits

Jun 24

Gender Matters When it Comes to Retirement Planning

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

ARKK

ARK Innovation ETF

VTI

Vanguard Total Stock Market...

XLE

Energy Select Sector SPDR...

VYM

Vanguard High Dividend Yield...

IVV

iShares Core S&P 500 ETF

SCHD

Schwab US Dividend Equity ETF...

XLK

Technology Select Sector SPDR...


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X