Europeans Load Up On Gold Bullion and Gold ETFs (GLD, SGOL)

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May 11, 2010 10:03pm NYSE:GLD NYSE:SGOL

“Alarmed at the plunging value of their currency, Europeans are leading an exodus out of the euro and into gold. The burgeoning demand pushed gold for delivery this month up 1.6% on Tuesday to


 settle at an exchange-record $1,219.90 on the Comex division of the New York Mercantile Exchange. The gains continued in electronic trading after the close, where gold reached $1,233.50 an ounce. The euro has slumped 13% against the dollar in the past six months and five percentage points of that has come since the beginning of May. The sharp decline has pushed investors around the globe into safe havens—from the U.S. dollar to Treasurys—but among the most popular is gold. Anecdotal evidence shows Europeans are leading the charge,” Carolyn Cui and Liam Pleven Report From The WSJ.

Referring to the ETFS Physical Swiss Gold Shares (NYSE:SGOL)….  “ETF Securities, a London-based fund manager, had an inflow of $490 million into its gold-backed funds in the past two weeks. All of that came from European investors, said Nick Brooks, the firm’s head of research and investment strategy.”  The flight to gold “is not a short-term trend,” Mr. Brooks said. “Sovereign debt problems are going to be with us for a longer term.”

Reuters was also reporting increased demand in the SPDR Gold ETF (NYSE:GLD)….  “U.S. gold futures rose to an all-time high at above $1,230 an ounce on Tuesday, suggesting economic uncertainties and fears about the euro zone debt contagion spreading beyond Greece. Investment demand was strong. The exchange-traded fund SPDR Gold Trust (NYSE:GLD), said holdings rose over 3 tonnes to a record 1,192.150 tonnes.

Cui and Pleven go on to say, “The euro’s fall was halted only briefly early this week, when European governments announced a $1 trillion bailout package aimed at supporting troubled nations. The euro clawed back some ground, rising to about $1.30, but has since retraced much of its gains and was at $1.2683 in late U.S. trading. The flight by Europeans into gold indicates that they still harbor serious concerns about the potential consequences of the bailout, such as rising inflation or slowing growth, both of which would harm the value of their relatively new currency. As long as Europe’s problems persist, gold could still rise against the euro.”

“Hedge funds such as Paulson & Co. have also loaded up on gold assets this year. Gold is typically seen as a hedge against a fall in paper currencies, and the most watched of those is the greenback. Many investors who piled into gold last year did so amid worries that the U.S. dollar would be the currency in trouble. But with Europe struggling and the U.S. looking relatively strong, the euro has become the target. For all the rising demand, gold remains well below its inflation-adjusted high: $2,309.18 hit in January 1980,” Cui and Pleven Report.

See more details on the WSJ article: HERE

See more details on the Reuters article: HERE

Investors have been turning to Gold ETFs since the economy has been been in troubled times.  They offer a great way to protect you against risk in your portfolio during uncertain times. We have put together some other ETF options for your viewing below:        

LONG:        

The investment ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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 ETF (NYSE: 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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