Image courtesy of Holabird Western Americana

GLD Holdings Hit 33-Month High

June 13th, 2016 by

Over the last month, gold prices have risen an impressive 6%. This was kicked off by the most recent unemployment report that was far worse than expected. Precious metal prices have surged since then, with gold advancing from $1,210/oz to above $1,285/oz over that time.

Accordingly, the largest gold ETF, the SPDR Gold Trust (GLD), saw its holdings of gold bullion rise 0.74% to 893.92 metric tonnes last Friday—the highest levels since October 2013, a full 33 months ago.

Main Causes

Image courtesy of Holabird Western Americana

Image courtesy of Holabird Western Americana

The rally for gold and the other precious metals helped push the share price for GLD up another 0.75% on Monday, rising to $122.50/share. This was the highest share price that the fund has seen in over a year, but remains well short of where it traded in 2012 and 2013.

The recovery from a “Mellow May” for the precious metals shows continued confidence in gold as safe haven. Moreover, the dire need for such a safe haven has also been reinforced by three main factors, at least in the near-term:

  • Unfavorable, volatile market conditions
  • Uncertainty ahead of several countries’ central bank meetings
  • Unknown consequences from a potential “Brexit”

These influences continue to portend strong gold prices as the summer unfolds. The common theme between them is obviously The Unknown; such uncertainty is anathema when it comes to investment. When the direction forward is unclear, physical precious metals are usually touted as the safest possible hedge against such potential market disruptions.

Gold Miners

gold-mineShares of gold mining companies are often lumped together with gold ETFs as “gold stocks”—equities that offer some exposure to the gold market. In general, the major mining firms are more popular among investors both large and small.

However, junior miners are often seen as a low-cost, potentially high-reward way of speculating on the gold market. Indeed, many junior miners have doubled since the beginning of the year (or better).

James Stafford of oilprice.com explains:

“What happens with juniors is that they do all the heavy lifting, and then the majors swoop in with the big money once a new discovery is ready to be mined.

gold-egg-basketWhile the major miners are already enjoying a stunning revival and the billionaire investors are already raking in the revenues, the juniors are the next spot on this high-speed commodities train, because this is where the real reward will be—and it just got a lot less risky.”

Regardless of how popular gold mining stocks and gold ETFs may appear, however, they are still only proxies for the gold price, and are frequently influenced by speculators. The only real safe haven is to hold physical precious metals.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.