Investors and Hedge Funds Hang on Tight as Gold Sets Up for 2nd-Half Rally (GLD) (IAU) (SLV)
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After months being stuck in no-man's land, gold finally broke out of its tight trading range a few weeks ago. Since the start of the month, SPDR Gold Shares ETF (NYSE: GLD) has tacked on 3.5 percent - not bad considering its lackluster 12 month performance. With gold comfortably out of the trading range, it is now free to move higher with continued attacks on $1675 per ounce, a level seen as near term resistance.
Gold is supported by positive fundamental data as well. Fund flows into the largest gold ETFs have been solid, with GLD adding 38 tonnes in just the last month. Additionally, quantitative easing by the Fed along with reports of pending bond buying in the EU, which is supporting the euro exchange rate vs. the U.S. dollar, should support gold. All in all, conditions are lining up for a second half rally for gold.
While a second half run in gold appears likely, it isn't all good news for precious metals, and gold traders shouldn't lower their guard just yet. Just last week, Citigroup announced it was cashing in $410 million from a hedge funds run by John Paulson, one of the largest holders of GLD. A bet on Paulson is tantamount to a bet on gold, and clearly Citigroup isn't a huge fan of this bet. Today on a conference call with Bank of America, Paulson said aside from Citi his fund has not seen large redemptions, offsetting the pain slightly.
The biggest risk for gold could be Bernanke's speech in Jackson Hole on Friday. FOMC minutes earlier this month called for Fed easing fairly soon, and this was the trigger that drove gold out of its range. If Bernanke's speech pours cold water on these hopes, gold could be sunk. In the meantime, gold traders and John Paulson continue to hang on as gold kicks higher, setting itself up for a big second half move.
Today SPDR Gold Shares ETF (NYSE: GLD) and iShares Gold Trust (NYSE: IAU) are lower by 0.50, but they are higher by over 6 percent in the past 90 days. iShares Silver Trust ETF (NYSE: SLV) is lower by 0.3 percent intraday on Wednesday.
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Gold is supported by positive fundamental data as well. Fund flows into the largest gold ETFs have been solid, with GLD adding 38 tonnes in just the last month. Additionally, quantitative easing by the Fed along with reports of pending bond buying in the EU, which is supporting the euro exchange rate vs. the U.S. dollar, should support gold. All in all, conditions are lining up for a second half rally for gold.
While a second half run in gold appears likely, it isn't all good news for precious metals, and gold traders shouldn't lower their guard just yet. Just last week, Citigroup announced it was cashing in $410 million from a hedge funds run by John Paulson, one of the largest holders of GLD. A bet on Paulson is tantamount to a bet on gold, and clearly Citigroup isn't a huge fan of this bet. Today on a conference call with Bank of America, Paulson said aside from Citi his fund has not seen large redemptions, offsetting the pain slightly.
The biggest risk for gold could be Bernanke's speech in Jackson Hole on Friday. FOMC minutes earlier this month called for Fed easing fairly soon, and this was the trigger that drove gold out of its range. If Bernanke's speech pours cold water on these hopes, gold could be sunk. In the meantime, gold traders and John Paulson continue to hang on as gold kicks higher, setting itself up for a big second half move.
Today SPDR Gold Shares ETF (NYSE: GLD) and iShares Gold Trust (NYSE: IAU) are lower by 0.50, but they are higher by over 6 percent in the past 90 days. iShares Silver Trust ETF (NYSE: SLV) is lower by 0.3 percent intraday on Wednesday.
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