Deborah Baratz: The gold bull market is alive and well, meaning now’s the time for investing in gold exchange-traded funds (ETFs).
Gold kicked off the week with December futures rising $6.80 (0.4%) to $1,738.60 an ounce Monday. This came on the heels of Friday’s disappointing U.S. jobs report and the anticipation of a newsworthy week for the precious metal thanks to some possible central bank action.
Gold futures again edged higher today (Tuesday) with December futures at $1,736 an ounce. The gold price rise continues thanks to an increasing euro and the anticipation of a German court ruling Wednesday on the Eurozone bailout fund’s legality.
Adding to the bullish sentiment on gold is the anticipation of this week’s two-day Federal Open Market Committee (FOMC) meeting: Will they or won’t they announce another round of additional easing on Thursday?
While these events help price outlook for gold, they’re also drawing investors to gold ETFs.
On Monday, gold ETFs rose to a record high of 72.49 million ounces, reported Reuters.
In 2012, total holdings have increased by almost 3.5 million ounces; in the last month 2.7 million ounces flowed into gold ETFs.
The interest in investing in gold ETFs is another bullish signal for the yellow metal, erasing some worries over the sustainability of gold’s price rise.
“With a good portion of gold’s recent strength accounted for by the sharp increase in spec positioning, this certainly raises concerns on the longevity of the [gold price] move, especially with fundamental buying virtually out of the picture,” Edel Tully, a strategist at UBS, said to Reuters. “But the fact that the (ETF) camp – a relatively less-fickle group of buyers – has also been giving gold its vote of confidence offsets some of those worries.”
Now’s the Time for Investing in Gold ETFs
According to Barron’s, ETFs now sit in fourth place on the list of world’s biggest holders of gold when combining all ETF investors. This is greater than both Italy and France’s central banks.
Popular gold ETFs including SPDR Gold Trust ETF (NYSEARCA:GLD) and the iShares Gold Trust ETF (NYSEARCA:IAU) are nearing their February price highs after slipping in May. They are both up 10% year-to-date.
Gold ETF activity stands to surge depending on what the Fed delivers on Thursday.
In a research note by Societe Generale, analysts wrote, “Gold prices are highly sensitive to the evolution of the monetary base (M0) which expands during quantitative easing. During QE1 and QE2, gold prices increased 36% and 21% respectively.”
That’s why interest has soared in investing in gold ETFs.
Gold ETFs to Consider
In addition to the above ETFs, there are a few other ones that make good investments. With their shares trading around 10% higher year-to-date with single-digit returns, they go a little outside the box.
Take a look.
ETFs Gold Trust (NYSEARCA:SGOL): Investors have an opportunity to enter to the gold bullion market with SGOL. This fund has been around since September 2009 and it tracks gold bullion’s spot, net of fees and expenses.
It has about 1.1 million ounces of gold bullion bars stored in Zurich, Switzerland. The fund has $1.8 billion in total assets and year-to-date returns have been greater than 6%; it has gained 10.5% this year.
ETFs Asian Gold Trust (NYSEARCA:AGOL): Want some gold action in Asia? This may be an intriguing choice. The fund looks to match gold bullion’s performance and stores its gold in Singapore.
Since its January 2011 inception, it has managed assets of $74.6 million. Year-to-date, the product has returned around 6% and is up 10.7%.
PowerShares DB Gold Fund (NYSEARCA:DGL): This ETF is a little different as it tries to give exposure to gold price movements via gold futures. Its funds margin the futures with three-month U.S. Treasuries, so returns will include earned interest.
This fund has been around since January 2007 and has $390.5 million in assets under management. Year-to-date, it has returned over 5% and is trading up 9.55%.
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