GLD, Other Gold ETFs, Curiously Dip Amid Uncertainty
Gold's dip at looks like a typical time to buy may be due to its nearly 20% gain this year.
As the equity markets opened Friday to increased uncertainty thanks to reports of a cybersecurity glitch disrupting Microsoft Inc. systems, gold ETFs curiously fell.
Gold often rises in times of uncertainty. Today's more than 2% pullback by the precious metal, reflected in the SPDR Gold Trust ETF (GLD), is being described as part of macro events involving global central banks and gold investors.
“It certainly looks like a profit-taking move by investors who didn’t get a lot of breakout from the April and May highs for the price of gold,” said Rob Haworth, senior investment strategist at U.S. Bank Asset Management in New York.
GLD Pulls Back as Momentum Slows
The price of gold, which reached peaks this year in mid-April and mid-May, was essentially flat through earlier this month when the price gained 6% to $2,475 an ounce on July 16. With Friday’s drop, gold is down 3% from that high.
Paul Schatz, president of Heritage Capital in Woodbridge, Conn., acknowledged the potential factors that might drive the price of a safe-haven asset like gold higher, including the Microsoft problems and an unprecedented U.S. Presidential election. However, he added, “Gold doesn’t trade day to day on macro news.”
Since the start of the year, GLD has gained 19%, which compares to an 18% gain by the SPDR S&P 500 ETF Trust (SPY).
Schatz and Haworth both recognize the drivers behind the price of gold up until now as investors buying gold in anticipation of Fed rate cuts and global central banks, including China, buying gold.
“Gold was at a new high this week, and now it’s pulling back,” Schatz said. “I don’t think it’s anything more than that.”
Haworth said many of the drivers behind the gold price rally are starting to fade, which explains the pullback heading into the weekend.
“Yields are up in the U.S., the dollar is stronger and inflation expectations are not moving higher,” he said. “There’s just not a lot to drive the price of gold at this point and there isn’t a lot of clarity on whether the Chinese central bank will continue buying gold.”