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Has the Gold ETF Bull Market Run Its Course?

Is the 14-year bull market in gold winding down? As equities rally early on in 2013, some are betting that the run-up in gold is over, evidenced by the poor performance of the metal and related exchange traded fund in the fourth quarter.

“Many analysts have declared that the bull market for gold is over and that its price will not advance much further than $1,700 per ounce,” John Nyaradi wrote for MarketWatch. [Gold ETFs: Bullion Prices Up for the 12th Straight Year]

Meanwhile, Goldman Sachs commodity analysts introduced a new call: gold at $1,200 an ounce by 2018, Business Insider reports. The analysts think an improving economy will lower demand for safe-haven assets like gold, and they expect interest rates to rise. Also, outflows from gold-back ETFs would speed a decline in prices, they said.

Gold prices and the largest focused ETF, SPDR Gold Shares (GLD), have been in a downtrend since the fourth quarter of 2012, although the 200-day simple moving average has provided support recently.

China’s role in gold’s performance is a huge factor. Gold imports for China in 2012 are exceeding acquisitions in 2011 by a few hundred tons and the physically-backed gold ETF is about to debut in the country. [Tom Lydon Outlines the Case for Holding Gold ETFs]

However, central banks are still buying up physical gold and inflation is another factor that looms in the near future. Since so many banks are printing currency, gold is the safe haven that will hold its value. Plus, many investors are weary of paper money and financial markets at this time. These are reasons why gold can continue in bull market mode.

On the flip side, the value of the U.S. dollar is expected to rise once quantitative easing is over. This could spark further flights from gold, as has been evidenced since October 2012. According to the U.S. mint, the sale of gold coins has declined 25% since 2011, reinforcing the October 2012 downtrend. [Gold Coin Sales Keep Falling as Investors Buy Bullion ETFs]

Long term, gold still has the capacity to finish off 2013 in a bull market, but for the near term, gold does not have the same shine as it did at the same time last year.

Other physically-backed gold ETFs include:

  • iShares COMEX Gold Trust (IAU)

  • ETFS Physical Swiss Gold Shares (SGOL)

  • ETFS Physical Asian Gold Shares (AGOL)

SPDR Gold Shares


Tisha Guerrero 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.