SPDR Gold ETF: Quiet Before The Storm? (GLD, IAU)

Christian Magoon: GLD Steadiness Belies A Nervous Market:  The SPDR Gold Trust (NYSEARCA:GLD), has virtually remained flat over the first two days of the week after a large rally last Friday despite significant turmoil in Europe. The EU crisis appears to be coming to a new head and the next material move in GLD will be decisively bearish or bullish.

The latest development in the ongoing EU crisis seemed to point to a greater chance of a globally coordinated dose of liquidity from Central Banks. Spain has apparently been shut out of credit markets and is appealing to the EU for help in recapitalizing its banks according to Reuters. Meanwhile the Group of Seven Nations held an emergency meeting on the EU crisis but no public statements were made afterward.

GLD, which tracks the price of gold, remained virtually flat to slightly down. This seems to reflect a cautious approach by investors as a huge dose of liquidity would send gold prices much higher but a stale mate in the EU crisis could be devastating for gold in the short term. Here’s the latest five day Google Finance chart of the SPDR Gold Trust. Note the rally Friday and then a plateauing over the first two days of this week.

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Gold ETFs Like GLD Under Assault

Gold ETFs like GLD have been under duress since the end of February when FOMC comments ended investors’ hope of a immediate QE3. Until last Friday’s rally, gold ETFs had erased virtually all of their gains for the year and were basically flat. Indeed, May of 2012 saw gold decline by 6% for the month, the worst gold price decline in May for 30 years. However on Friday June 1st, speculation began to form about a liquidity effort around the globe which rallied gold prices 4% on the day. Continued drama over the weekend and early this week however seems to have instilled a more cautious – if not nervous – tone in the markets and gold prices. Over the coming days the European Central Bank will meet and Federal Reserve Chairman Ben Bernanke will testify before Congress which will both be heavily examined for indications of potential liquidity measures.

Currently, GLD and all other gold ETFs that seek to track the price of gold are positive for the year. The iShares Gold Trust (NYSEARCA:IAU) continues to be the lowest cost and best performing gold ETF. Here is a snapshot of the gold ETF performance grid from GoldETFs.biz.

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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.”

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