What to Expect Next for Gold ETFs

The financial media says the price of gold is being driven higher by a “mounting expectation of a Federal Reserve rate cut” (CNBC, Sept. 9). Yet, our Global Market Perspective called for a gold rally nearly a year ago, when the publication said “a low is approaching.” Gold ETFs have been slow to catch on, but our September Global Market Perspective says that is changing:

Gold has been doing well, too. GMP’s bullish stance has been rewarded as spot prices have rallied 22.5% so far this year, outperforming the year-to-date total return of the DJIA at 11.0%, the NASDAQ 100 at 17.4%, and the S&P 500 at 19.0%. Intermediate wave (5) started at $1622.37, the September 26, 2022 closing price basis spot, and will comprise five Minor degree waves up.

Until there are five Minor degree waves up, gold’s advance will continue, despite near-term pullbacks. Last month, EWFF discussed the lack of expansion in gold’s open interest, which remains muted relative to prior advancing waves. When investors are excited about gold’s prospects, open interest usually expands as traders open new futures contracts and maintain the ones already open. Another positive indicator remains the lack of strong buying by gold’s exchange-traded funds. EWFF discussed the bullish implications for gold prices in April and June. The chart below shows that exchange-traded funds are just starting to recognize gold’s rally potential and have been increasing their purchases. In May, exchanged-traded funds held 80 million troy ounces of gold, while today they hold nearly 83 million troy ounces. As gold’s rally continues, ETFs should continue to increase their holdings.

Are more record highs ahead for gold? Our Global Market Perspective will stay on top of the trends in precious metals so you can adjust your portfolio accordingly.

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