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SPDR Gold Trust (ETF) (NYSEARCA:GLD) Rises, Icahn Bets Big

Direxion Shares Exchange Traded Fund Trust (NUGT) Gold

SPDR Gold Trust (ETF) is climbing this morning as gold prices edge higher. The Wall Street Journal reports that prices are edging up on the London spot market this morning. Spot gold climbed 0.32% to $1,126.2 per troy ounce in European trade today. The SPDR Gold Trust (ETF) is also riding on the uptrend in gold to climb 1.14% to 108.97 as at 10:25AM EDT.

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The gains recorded today confirm the recent spate of bullish sentiment on the yellow metal. CNBC reports that analysts are bullish that mining firms will start seeing an improvement in their prospects as the price of the yellow metal continues to rise.

Carl Icahn makes bullish bet on gold

Billionaire investor, Carl Icahn is one of the key players making big bets in support of the bullish thesis for the bullion. A joint filing shows that Icahn and some investors have bought a 8.46 percent stake in mining firm, Freeport-McMoRan.

Icahn seems to believe that gold is currently undervalued and that gold mining firms have much potential ahead when gold rises to its fair value. Part of the filing holds that “the Reporting Persons acquired their positions in the Shares in the belief that the Shares were undervalued”.

Some analysts are doubtful that gains will hold

Nonetheless, Joni Teves, an analyst at UBS AG thinks that the looming clouds of a potential increase in U.S. Interest rates could limit the rebound in the yellow metal and the SPDR Gold Trust (ETF) . The U.S. Federal Reserve has hinted that it might not raise rates in September as expected. The delay in rate hike has spurred positive interest in bullion but some analysts believes that the delay is raising interest rates is akin to postponing the apocalypse.

In his words, “Given big moves in its price since the beginning of August, gold is undergoing a bit of consolidation.” A rate hike will surely reduce the allure of the yellow metal because yield-bearing assets will present better prospects. Investors in the bullion cannot expect to be paid a dividend or an interest on their holdings; however, when rates are increased, bonds, bills, and other yield bearing assets will be more attractive to investors and gold might crash lower.

Howie Lee, an investment analyst at Phillip Futures sums up the relationship between gold, the SPDR Gold Trust (ETF) and the interest rate. In his words, “The very fact that gold is holding up above $1,100 suggests that this market thinks a September rate hike has been shifted to December… Until it happens, gold will continue to have to play a guessing game with the Fed.”

 

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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