Gold ETFs Eye 2011 High on Central Bank Stimulus

ETF Trends

Recent easing measures from the Federal Reserve and other central banks have pushed investors into gold ETFs as a hedge against depreciating currencies. While October has historically been a weaker month for gold traders, some expect gold prices to shoot to new highs eventually. Some are even throwing out forecasts upward of $3,000 an ounce in the long-term.

Bullion holdings in physically backed gold ETFs are at record levels at about 82 million troy ounces as gold stores have increased about 6.2 million troy ounces year-to-date, with most of the demand taken ahead of the Fed’s quantitative easing announcement, reports Sumit Roy for Hard Assets Investor. [Gold ETFs: Prices Hit All-Time High in Euros]

Gold prices, though, have run into resistance at $1,800 an ounce, and October has typically been a down month. Specifically, gold bullion’s average monthly return since 1980 for the month of October has been -0.80%, reports Mark Hulbert for Market Watch.

John LaForge, a commodity strategist at Ned Davis Research, has found that gold tended to trade lower at the start of Diwali, or the festival of lights festival in Asia, and before the Indian wedding season.

Gold demand has historically been dominated by India, especially as “roughly 50% of gold demand still comes from jewelry,” LaForge said in the article.

Nevertheless, there are analysts who remain bullish on gold’s outlook, with one projecting prices of as high as $3,000 per ounce by early 2014, reports Jennifer Booton for Fox Business.

“We remain secular bulls on gold,” BofA analyst Stephen Suttmeier said in a report to clients. “Key chart and uptrend supports between $1,600 and $1,400 have held and we have viewed $1,550-$1,500 as a good area to buy gold.”

Suttmeir currently points to a long-term uptrend that targets resistance of $1,800 to $1,925, and a secular bull market that could push gold to between $2,050 to$2,300 and up to $3,000 in the longer term.

Gold ETFs include:

  • SPDR Gold Shares (GLD)
  • iShares Gold Trust (IAU)
  • ETFS Swiss Gold Shares (SGOL)
  • PowerShares DB Gold Fund (DGL)

SPDR Gold Shares

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GLD_ETF

For more information on gold, visit our gold category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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