2 Gold ETF Bullish Signals Not Involving QE3 (GDX, GDXJ, GLDX, RING)

Christian Magoon: Gold ETF products have been moving steadily upward over the last few weeks, primarily on anticipation of another round of stimulus from central bankers. Here’s the four week performance chart of the 10 most owned gold ETF and ETN products in the market from GoldETFs.biz. Note that outside of leveraged gold ETFs, traditional gold stock ETFs take four of the top 10 spots. They include the largest gold miners ETF (NYSEARCA:GDX), a gold exploration ETF (NYSEARCA:GLDX), a small cap gold miners ETF (NYSEARCA:GDXJ) and a gold miners ETF just launched this year (NYSEARCA:RING).

best gold funds, gold etf list. gold top performers

The top 10 gold ETF and ETN products have produced solid returns over the last month with most gaining double digits.

Despite all the speculation surrounding QE3 however, gold ETF investors are entering two sweet spots for the price of gold that could provide fuel for the metal to continue to run upward. These catalysts are the timing of past gold price recoveries and the seasonal trends in gold prices. Both present compelling cases for gold ETF investors to remain bullish regardless of Federal Reserve policy.

Historic Timing Of Gold Price Corrections & Recoveries

Gold price corrections have happened a variety of times over the last 10 plus years. More often than not, it has taken over a year for the price of gold to rebound and surpass its old high. Casey Research just published the graphic below outlining recent gold price corrections and the timing around the recovery to new highs.

gold correction, gold recovery, gold research

Gold ETF investors may see gold prices surpass previous highs in 2012.

In the Casey Research article entitled “Your Window To Buy $1,700 Gold Is Closing,” the chart above is highlighted:  ”In 2006, after a total decline of 22.6%, it took a year and four months for gold to surpass its old high. After the 2008 meltdown, it was a year and six months later before the metal hit a new record. The 16.2% drop in 2003 lasted seven months, and another two months before the price stayed above it. You can see that our correction has lasted just shy of a year. If we matched the recovery time of 2006, gold would hit a new high on Christmas Eve (Merry Christmas!).

Gold’s Seasonal Performance Trend

Since 2000, gold ETF investors should note that the best three performing months of the year for gold have been August, September and November. Despite a historically negative October, August through February is dominated by large historic price increases in gold. Here’s the chart from Bloomberg data.

gold chart, gold price chart, monthly gold price

Gold ETF investors should note the historic positive trend for gold prices in the last part of the year.

While most gold investors will on focus on Federal Reserve developments, some will realize that gold ETF products have a lot going for them besides QE3. The bullish historic data that exits on gold prices shows that gold appears to be entering both a profitable time of the year and a stage in the average recovery of gold prices that bodes well for price appreciation. While history doesn’t repeat, it often rhymes and for gold ETF investors this may be the year that several factors line up to create new highs.

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.”

Leave a Reply

Your email address will not be published. Required fields are marked *