This year gold prices have rallied as a result of of disrupted supply chains and closed down economies due to the global coronavirus pandemic and rising tensions between the US and China. Now, gold ETFs are gaining momentum as a hedge against the potentially overbought stock market, some traders say.
Stocks rebounded early on Friday after their worst trading session since March on Thursday. Gold prices saw their best weekly gain since April amid concerns about the health of the global economy.
One of the best-performing gold ETFs GLD hit its all-time high of $185.85 in September 2011. It climbed less than 1% to above $163 in early Friday trading, and stands at $162 in premarket trading on Tuesday.
“If we look at the ETF GLD that tracks the underlying gold futures, it’s been an amazing run,” Todd Gordon, managing director of Ascent Wealth Partners, told CNBC’s “Trading Nation” on Thursday. Citing a chart of the SPDR Gold Shares Trust (GLD), he pointed that it “looks like we’re heading back up towards the highs, potentially.”
From the start of 2020, gold has been increasingly in demand from buyers who believe it is likely to hold its value relative to other assets as the virus shakes the global economy. As a result, gold ETFs even overtook futures as investors look for exposure to safe-haven assets like gold.
Since late March, total ETF holdings have grown 14%, while long positions — bets on higher prices — on the Comex exchange in New York fell 7%, according to data from the World Gold Council and CME Group, which operates Comex.
SPDR Gold Shares, the largest and most actively traded among gold ETFs, has swollen its gold hoard by 24% since late March.
Futures and gold ETFs allow investors to gain exposure to gold prices in a more controlled way. Gold futures contracts give buyers the right to receive metal at a future date. Gold ETFs store gold on investors’ behalf.