Gold prices have been trending up in the last month due to
renewed hopes for QE3. In the past few days, the prices have also
benefited by the rise of the Euro against the US Dollar.
While the gold is now up about 3.6% year-to-date (vs. 10.2% for
S&P 500), it is still down about 17% from its peak in September
last year. (Read:
The Comprehensive Guide to Gold ETF Investing
)
Near-term direction for the gold will be guided by the outcome
of the FOMC. If the Fed announces a new round of monetary easing,
the Dollar will trend lower while the gold may continue its
uptrend.
Gold has suffered due to slowdown in China and India, which
together account for more than 40% of the global demand.
Additionally, the demand in India has also been affected due to the
jump in gold price resulting from the decline of the Indian rupee
against the US Dollar. In India the prices are near all-time high
in the Rupee terms. Not to mention some of the bizarre theories
about the gold price manipulation by the central banks, which have
gained momentum of late, in the wake of Libor manipulation
scandal.
I believe in the long-term investment case for gold, due to its
diversification benefits and ability to act as a hedge against
inflation. Further though the metal does not provide any income
yield, the opportunity costs of holding it are now very low now due
to record-low interest rate environment. The central banks,
especially in the emerging countries have continued to add to their
gold holdings, in order to diversify their reserves, which will
also provide support to the price.
However the short-term trend may not be very favorable due to
continued strength in the US Dollar, concerns over deflation and
reduced demand from China and India.
Zacks consensus forecasts for gold calls for 1.15% appreciation
by the end of June 2012, somewhat similar to 1.92% appreciation for
silver. Popular gold ETFs
GLD
and
IAU
have Zacks ETF Rank 3 (Hold) currently. Please visit
Zacks ETF
Center
to read research reports on these ETFs.
On the other hand, other precious metals platinum and palladium
are expected to rise of 6.72% and 11.16%, respectively over the
same period. Please see
Will Palladium ETF Shine Brightest This Year?
And
Time to Invest in Platinum ETFs?
Do you think that the gold will regain its luster if the Fed and
other central banks announce additional easing measures or the 12
year bull run of gold is over now?
.
SPDR-GOLD TRUST (GLD): ETF Research Reports
ISHARS-GOLD TR (IAU): ETF Research Reports
ETFS-PALLADIUM (PALL): ETF Research Reports
ETFS-PLATINUM (PPLT): ETF Research Reports
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