Christian Magoon: Physical gold ETFs had a negative week as concerns about a credit downgrade of Spain and a likely EU bailout mounted. In addition, the release of upbeat economic data in the U.S. on Friday tempered some expectations on the duration of QE3. Finally the harvesting of recent gains in gold seemed apparent. The largest of all gold ETFs, the SPDR Gold Trust (NYSEARCA:GLD), lost close to 1.5% through Friday’s close. Here’s a snapshot from the gold ETF performance grid from GoldETFs.biz.

Gold ETFs tracking the price of gold lost ground for the week.

GOLD ETFS VERSUS U.S. DOLLAR

Concern over the possibility that Spain may need to seek a bailout from the European Central Bank (ECB) did not help gold prices this past week. That concern strengthened the U.S. Dollar slightly. Strictly from a monetary standpoint, gold becomes worth less dollars during periods of dollar strength. This is because gold is primarily denominated in U.S. Dollars.

Here’s the NASDAQ interactive performance chart comparing GLD to the PowerShares DB U.S. Dollar Index Bullish ETF (NYSEARCA:UUP) over the last week.

GOLD ETFS IMPACTED BY PROIT TAKING AND PRESIDENTIAL RACE?

Of course other factors also affect the price of gold, primarily supply and demand dynamics. Demand for gold appears to be less intense after gold’s QE3 inspired bull run has dissipated. Investors and traders are likely to be taking profits from this surge.

In addition, the outcome of the U.S. Presidential election is still unknown which could be giving gold investors some pause. It is unclear how a change in the administration would impact current QE3 efforts. Republican candidate Mitt Romney has expressed concern over the effectiveness of past stimulus efforts. While Federal Reserve Chairman Ben Bernanke’s term lasts into 2013, a Romney presidency would have the ability to name a new Fed Chairman afterward. This introduces a level of uncertainty over the current stimulus approach the Fed has favored.

For all the above factors and more, gold ETFs are actually in negative territory over the last four weeks. Here’s the performance grid snapshot from GoldETFs.biz. (Note that (NYSEARCA:AGOL) is positive, however it has such a minimal amount of shares traded that is can see considerable short term return discrepancies versus the peer group.)

Gold ETFs are now in negative territory for the month.

Despite the recent slowdown and consolidation of gold ETFs, the funds are still in double digit gain territory for the year. Leading all gold ETFs is the lowest priced fund, the iShares Gold Trust (NYSEARCA:IAU). IAU has gained over 12% for the year. Trailing it by 25bps is the second best performing gold ETF, the ETF Securities Swiss Gold ETF (NYSEARCA:SGOL). Here’s the performance grid snapshot sorted by year to date performance.

IAU leads all gold ETFs in performance and cost efficiency.

Going forward gold ETFs should continue to be influenced by developments in Europe (Spain) and economic data from the United States. Investors should remain vigilante as gold ETFs have lost their forward momentum and now appear to be fading due to the lack of another positive catalyst.

Written By Christian Magoon From Magoon Capital

Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011,Financial Planning magazine dubbed Christian an “ETF Pioneer.”

NYSE:AGOL, NYSE:GLD, NYSE:IAU, NYSE:SGOL