SPDR Gold Trust (ETF): Signals Of A Trend Change

gold timeGold Silver Worlds: Is gold’s bottom in? That question is top of mind of all gold enthusiasts. Of course, the bears still believe that gold will go through a hard landing.


The truth is that we are seeing mostly signals of a trend reversal, both in the very short run as well as in the bigger picture.


First, starting with the SPDR Gold Trust (ETF) (NYSEARCA:GLD), as we discussed in Why Increased Western Gold Demand Could Lead To A Gold Supply Shortage, the GLD ETF gold holdings increased from 793.16 tonnes on Jan 31st 2014  to 803.7 tonnes on Feb 27th 2014. That trend has continued in the past week. Tim Iacono writes today that the GLD has added 7.5 tonnes to its holdings for the third time in the last 8 weeks. These are the biggest daily inflows the trust has seen since late-2012 and they signal renewed interest in the metal by U.S. investors.


Western investment demand is indeed a key factor for higher gold prices.


Short term picture


What’s more, one could see a remarkable strength in today’s gold price compared to the other financial assets. Consider this:



  • US equities: The Dow Jones Index was down 0.41% and the S&P 500 index was down 0.51%.

  • European equities: The Euro Stoxx 50 was down 0.01%.

  • Crude oil was down 1.60%.

  • US dollar ended status quo.


Gold was up 0.72% on the day. One could argue that it was safe haven buying because of intensifying tensions in Ukraine. If that would have been the most important driver, then it would be reasonable to see higher crude oil prices as well (just like two weeks ago when the tensions in Ukraine broke out), which was not the case.


Although one day does not make a market, it is remarkable to say the least. So let’s look at what is happening in the bigger picture.


Big picture


Gold has been negatively correlated with US equities since November 2012. That trend seemed to be changing since the start of the new year. While equities saw a correction early February, gold has held up remarkably well. Since then, both the yellow metal and equities have gone up simultaneously. Does this spell the top of equities? Or will both assets start a period of a positive correlation? We do not have the answer, time will tell, but strength in gold is the most obvious conclusion at this point.


gold price vs SP 2012 2014 price


Likewise, US Treasuries seem to be topping in the larger timeframe. Since April 2013, gold and Treasuries have been negatively correlated.



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