As sovereign debt concerns continue to emerge and the US continues to implement a loose monetary policy which results in increased money supply, gold continues to glimmer surpassing the $1,400 per ounce mark giving support to the SPDR Gold Shares (GLD), PowerShares DB Gold Fund (DGL), ETFS Physical Swiss Gold Shares (SGOL) and the Market Vectors Gold Miners ETF (GDX).

Gold futures contracts for December delivery hit an intraday price of $1,410.40 per ounce in electronic trading and the front month November contract rose to $1,402.80 per ounce as investors fled to the precious metal’s safe haven appeal.  Costs of insuring against bond defaults on the sovereign debt of Ireland, Portugal and Spain continue to rise amplifying the enhanced risks in the region and the likelihood of default, which provided positive price support to gold.

Furthermore, concerns of currency devaluations around the world are boosting gold.  The recent announcement by the Federal Reserve to launch a $600 billion program to purchase Treasuries is expected to increase money supply and further devalue the US dollar.  Additionally, many investors are concerned that banks will remain reluctant to lend which could potentially backfire against the Fed and have an even further devastating effect. 

At the end of the day, fear in the global markets and currency devaluation are driving the price of gold bullion and are likely to remain prevalent in the near future.  As a result, the aforementioned ETFs are likely to witness positive price support.

  • SPDR Gold Shares (GLD), which is the most actively traded gold ETF and moves in tandem with the price fluctuations of gold bullion
  • PowerShares DB Gold Fund (DGL), which gives exposure to gold through futures contracts
  • ETFS Physical Swiss Gold Shares (SGOL), which is backed by physical gold bullion
  • Market Vectors Gold Miners ETF (GDX), which is an equity play on gold and includes holdings of companies that primarily derive their revenues through the mining and exploration of gold and other precious metals.  Some holdings include Barrick Gold Corporation (ABX), Goldcorp Inc. (GG) and Newmont Mining (NEM).

Disclosure: No Positions

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