Christian Magoon: Gold ETF shares (NYSEARCA:GLD) have been up, down and back up again in 2012. The leading physical gold ETF trusts have now gained around 13% for the year. Going forward, shareholders in gold ETF products should monitor the five potential catalysts outlined visually in the list below. Each one has the potential to significantly move the price of gold.
#1 THE UNITED STATES FEDERAL RESERVE
Gold ETF shares have already been boosted the anticipation and realization of QE3. The U.S. Federal Reserve has announced a program to inject more liquidity in the market. This plan is open ended and is likely to continue creating a near term tailwind for gold prices and gold ETF investors.
#2 CHINA & INDIA
The two leading consumers of gold are China and India. Both value gold culturally and as a store of value. Due to slower economies in the two countries however, demand has been less than expected. Future levels of demand from these two countries will have a material impact on gold prices and related gold ETF products.
#3 The European Central Bank (ECB)
The ECB could strengthen the U.S. Dollar should the European debt crisis boil over again. Dollar demand has come at the expense of gold prices in 2012. Now that momentary stability has calmed the EU and U.S. Dollar demand, gold ETF shares have benefited. Will it last though?
#4 GOLD PRODUCTION LEVELS
Exploring, finding and then mining gold is a costly proposition. That is why gold supply is limited. This scarcity increases gold’s appeal to investors. Gold production levels will be crucial to the supply dynamic influencing gold prices.
Turmoil in the Middle East, between Iran and Israel could send the world into another conflict. In times of uncertainty, gold has traditionally been a hedge and a universally accepted store of value. Thus escalation of the current situation in Iran would have a material impact on gold ETF share prices.
Like any investment, know one knows what the future holds for gold. One thing is certain however, gold will continue to be valued for its diversification, scarcity and cultural significance. For investors in gold ETF products, this is encouraging news in uncertain times.
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.”