Direxion Shares Exchange Traded Fund Trust and other gold ETFs might start a rollercoaster ride in the next couple weeks as economic news start to affect the general price of gold. The Wall Street Journal reports that the price of the yellow metal is down in U.S. markets as the dollar strengthened because of decent jobs data. Gold for December delivery was down by 0.9% at $1,116.60 per troy ounce on the Comex.
Despite the weakness in the price of gold, analysts believe that the long-term demand curve for the gold suggest that the bullion may not crash even if the fed raise interest rates. It is no longer news that the raising of interest rates will make income-yielding assets such as bonds more attractive to investors than gold which is only a means of storing value. The market only has guesses on when the Fed is likely to raise interest rates but the Fed has hinted that any delay in the raising of interest rates is temporary.
The increase in global demand for gold might offset decline in demand stateside
The Wall Street Journal reports that gold exports from Hong Kong to mainland china have been on an increase in the last one year. China doesn’t provide official figures of its gold trade but exports from Hong Kong to the mainland provide information by proxy on its gold trades. It was reported that the Hong Kong bullion exports into China reached 1,891.9 tons in the year-to-date period to mark a 560.9-ton increase in the last one year.
WSJ notes that the increase in the demand for the bullion suggests that the Chinese are increasing their purchase of the yellow metal ahead of the festive season. It is also worthy of note that the yellow metal still holds a strong “safe haven” status in traditional China. Hence, the Direxion Shares Exchange Traded Fund Trust still have a bright outlook ahead.
Mining.com also sheds light on the increase in the global demand for gold as India (the second largest market for the bullion after China) continues to increase its purchases. It was noted that Indian bullion in August were $4.95B or 140 tons to mark more than double the 89 tons that was reported in July.
Uncertainty remains for gold
The strong dollar makes the yellow metal expensive to foreign buyers and the strong dollar increases the chances that the Fed will raise interest rates sooner than expected. Direxion Shares Exchange Traded Fund Trust will face increased volatility as the market forces try determine the rise and fall of gold prices. However, once the Fed makes a definite move concerning interest rates, the market can expect the bullion to start trading in more definite pattern.