“Retail, or individual, investors around the world stocked up on gold bullion and flocked into gold-backed exchange-traded funds to preserve their net worth. SPDR Gold Shares, the world’s biggest gold ETF, increased its gold holdings by 45%, to more than 1,133 metric tons, valued at $40.2 billion at current market prices. The precious metal, which like other commodities is traded in dollar terms, reflected the decline in the U.S. currency earlier in the year. Gold prices retreated as the dollar rose late in the year. The gold frenzy also abated as some gold bulls decided to take profits, leading to a 10% retreat in prices in December. Silver lost 13% at the same time,” Carolyn Cui Reports From The WSJ.
“Many analysts remain bullish on gold in the near term. J.P. Morgan Chase analyst Michael Jansen expects the price of gold to reach $1,400 by mid-2010, as long as “the liquidity spigot remains open and the U.S. dollar remains under pressure.” Goldman analysts set a six-month price target of $1,260 for gold, citing the favorable low interest-rate environment,” Cui Reports.
“Next year, we will see new highs in gold without any doubt,” mainly driven by renewed pressure on the dollar, as central banks in Europe and China may raise interest rates sooner than the Federal Reserve in the U.S., said Philip Klapwijk, chairman of GFMS Ltd., a London-based metals consultancy. A double-digit jobless rate in the U.S. is likely to restrain the Fed, Mr. Klapwijk said.
“Still, the forces driving the gold rally are temporary, such as fiscal stimulus packages and central banks’ easy-money policies. In 2010, analysts say, the primary risk for gold is an earlier-than-expected increase in interest rates, especially in the U.S., if the economy strengthens. In early 1980s, a drastic tightening by the Fed sent gold into a decade-long bear market. Mr. Jansen of J.P. Morgan expects gold to peak after the second quarter of 2010, as “reduced expectations around inflation, higher global interest rates and a mildly stronger” dollar will push gold prices lower,” Cui Reports.
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We have listed some options for investing in gold through ETFs below:
The investment (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 (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 (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 (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 (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 (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 (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 (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.
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The investment (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 (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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