Christian Magoon: SPDR Gold Trust (NYSEARCA:GLD) Volatility Index Up Over 6% Intraday. The GLD VIX, or gold ETF volatility index, is surging to 3 month highs as investors flock to gold in anticipation of liquidity moves from central banks and take advantage of a gold sell off that occurred in May. GVZ, is the gold ETF volatility index created by the CBOE. It measures the volatility of the largest gold ETF in the world, the SPDR Gold Trust (NYSEARCA:GLD). Here’s the three month chart of GVZ from the CBOE website.
Gold ETFs like GLD and IAU are bouncing upward themselves in early trading on Friday. A chart from Yahoo Finance shows that GLD has gained over 3.5% intraday. Here’s the snapshot from Google Finance.
Gold ETF Products Negative In 2012
Through Thursday’s close, gold ETF products were negative for the year with the iShares Gold Trust leading the group in performance with a loss of.13%. Todays upward move would push all ETFs that track the price of physical gold into positive territory for the year.
Gold ETFs began 2012 on a high note, achieving close to double digit gains until late February. At that time Federal Reserve comments squelched the hopes of a QE3 which ignited a several month slide in gold prices. In the midst of that slide the EU crisis flared up considerably, sending investors around the globe into U.S. backed debt and currency, not gold. Adding to gold’s problems are concerns of weakened demand in some of the largest consumers of gold – China and India. China’s economy is slowing and even though its central bank appears to be a large buyer of gold, a slower economy means less gold jewelry purchases by the Chinese. Historically, the number one source of gold demand comes from the purchase of gold jewelry. India, has been the largest gold consuming nation in the world, but is now falling behind China due to a more severe deterioration in its economy and devaluation of the rupee. Combined, these two nations have lightened the demand for gold over the past few months, thus hurting gold prices.
The rally of GLD and the increased levels of the GLD VIX today are signs that investors believe gold has a good chance to regain its appeal. This is likely because of two factors. First, gold just suffered its worst performing May in 30 years, losing 6% for the month. Second, poor economic data from around the world is beginning to fan the embers for hopes of more liquidity from central banks. This move would be positive for ETFs like GLD and IAU which track gold prices but whether this bounce is for real remains to be seen. Nonetheless the surge in volatility and gold prices are a welcome site for gold ETF investors.
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.”