By nearly all accounts, gold and silver markets have made some impressive gains over the last year. Many investors look to the physical metals themselves but there are some advantages that should be understood for those looking into some of the more popular exchange traded funds: SPDR Gold Trust (GLD, Financial).
Essentially, the SPDR Gold Trust offers investors the benefits of physical gold minus the expenses. It provides investors with an opportunity to buy exposure to gold without the inherent risk of buying a miner’s share or stock in the company.
Prices in GLD have moved from the $102.89 to above $126.75 in the current calendar year. During the same period, physical gold prices have moved from the $1074.61 to the $1337.10, signifying a rise of 24.42 percent. By comparison, the rise in the SPDR Gold Trust Share has amounted to 23.20 percent, closely mirroring the rise of the physical gold prices (minus the costs).
Chart View: SPDR Gold Trust
Chart Source: easyMarkets
From January 2016 to September 2016, the falling employment rate and declining inflation were major factors in the Fed’s decision to hold interest rates. This assisted gold prices in their rise for early part of 2016, and consequently this led to the rise in the SPDR Gold Trust ETF. As per the World Gold Council, gold has seen unprecedented demand in first half of 2016, and this further fueled the prices of physical gold and supported the latest leg in the SPDR Gold Trust’s bull run.
As of June 2016, gold held in the SPDR reserves had risen by 52 percent compared to the amount of gold held at the end of 2015. The rise in physical assets was due to strong inflows from biotech investors into the fund, and further fueling the share prices.
Another significant reason for gold prices moving higher was the United Kingdom’s vote to leave European Union, which added to the safe haven allure of assets related to precious metals. Specifically, this event helped gold prices shoot up by almost $100 in forex markets in a single day. The event engineered uncertainty of global growth and demand for currency, and the resulting transactions propelled the prices of gold in an upward trajectory. This also induced central banks to buy gold in order to protect their currency, powering another bullish transactional flow in several regions of the world. All of these reasons have been supportive in helping gold prices to remain steady at elevated levels.
Recent comments from voting Fed members have been indicating the possibility of a rate hike in the near future, and this is something that will work as a deterrent for gold prices (and, ultimately, the SPDR Gold Trust share price). Though the uncertainty in global economies and demand from countries like India and China will likely be enough to overcome these negatives and support gold prices and the SPDR Gold Trust Shares into the end of the year.
