Fears Of A Double-Dip Recession Will Continue To Make Gold ETF’s Attractive In 2010

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January 1, 2010 9:42pm NYSE:DGL NYSE:DGP

double-dip‘The first few months of 2010 could very well be your last chance to buy gold at a decent price around $1,000 an ounce, as there will be increases in the longer term. Demand for bullion will continue


 to be robust this year with central banks, especially those with heavy exposure to the US dollar, expected to buy more gold than they sell, industry experts said. Christopher Wood, chief strategist at the broker CLSA who had predicted the US housing crisis, forecasted in early 2009 that the precious metal is likely to more than quadruple to $3,500 per ounce this year (2010). There are certainly indications that point to higher gold prices, but according to Rolf Schneebeli, former head of the World Gold Council, price increases will happen at the end of 2010 and the rate could well be between $1,300 and $1,500 per ounce,” Cleofe Maceda Reports From Gulf News.

“There is also the fear of a double-dip recession with a second drop of economic activity during 2010 after the first support actions of some governments have run out, which makes the central banks very cautious in not increasing the rates too early. All these means that inflation is certainly coming—- it’s just a question if it is coming already (this year) or only the year after. For gold, this means a certain increase in prices in the longer term,” Rolf Schneebeli added.

“With the outlook for 2010 still uncertain, it is only highly plausible that gold will further attract more supporters. “Gold, of course, is traditionally a safe haven in times of uncertainty and, as such, a long recognised global currency that will benefit—and has benefited—from economic uncertainty,” noted John McGaw, senior advisor to Golden Oryx. He said the uncertain outlook for 2010 is based on two conflicting scenarios: inflationary pressures brought on by central banks keeping lending rates artificially low to stimulate spending and a globally integrated financial system that is severely indebted and vulnerable to rising interest rates,” Maceda Reports.

Maceda continues saying, “Gurnos Stonuary, business services director at Nexus Insurance Brokers, earlier said the only way to make any profit out of gold is to buy it low and sell it high.” “It sounds obvious, but as gold purchase will never pay a rate of interest or dividends, there is no other way to make money from buying gold other than through the judgment of the market.”

The best way to play GOLD is with ETF’s.  We have listed some options for investing in gold through ETFs below:

LONG:

The investment (GLD) seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.

The investment (GDX) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund generally normally invests at least 80% of its total assets in common stocks and American depositary receipts (ADRs) of companies involved in the gold mining industry. The fund is nondiversified.

The Funds (GDXJ) investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index (the “Junior Gold Miners Index”). For a further description of the Junior Gold Miners Index, see “Junior Gold Miners Index.”

The objective of (SGOL) the newly listed shares is to reflect the performance of the price of Gold bullion, less the Trust’s operating expenses. The Trust is open ended and is designed for investors who want a cost-effective(1) and convenient(2) way to invest in Gold as well as diversify their Gold holdings.

The investment (UGL) will seek to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics twice the return of the index. It may employ leveraged investment techniques in seeking its investment objective.

The investment (DGL) seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold Excess Return. The index is a rules-based index composed of futures contracts on gold and is intended to reflect the performance of gold.

The investment (DGP) seeks to replicate, net of expenses, twice the daily performance of the Deutsche Bank Liquid Commodity index – Optimum Yield Gold Excess Return. The index is intended to reflect changes in the market value of certain gold futures contracts and is comprised of a single unfunded gold futures contract.

The objective (IAU) of the trust is for the value of its shares to reflect, at any given time, the price of gold owned by the trust at that time, less the trust’s expenses and liabilities. The trust is not actively managed. It receives gold deposited with it in exchange for the creation of baskets of iShares, sells gold as necessary to cover the trust’s liabilities, and delivers gold in exchange for baskets of iShares surrendered to it for redemption. The trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act.

SHORT:

The investment (DZZ) seeks to replicate, net of expenses, twice the inverse of the daily performance of the Deutsche Bank Liquid Commodity index – Optimum Yield Gold Excess Return. The index is intended to reflect changes in the market value of certain gold futures contracts and is comprised of a single unfunded gold futures contract.

The investment (GLL) will seek to replicate, net of expenses, twice the inverse daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics inverse to the index. It may employ leveraged investment techniques in seeking its investment objective.

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