The gold market may not be glittering with gains lately, but brighter days could be ahead. Gold exchange-traded funds (ETFs) have seen lackluster interest from investors even as prices hover near $2,000 an ounce. However, some analysts see that as an opportunity in disguise.
“Gold ETF holdings are languishing around $1,500 – nowhere close to previous peaks,” said Tobi Opeyemi Amure, an analyst at Trading.Biz. “When gold eventually breaks out above $2,050, that’s when ETFs will start piling in en masse, catapulting prices much higher.”
Tobi believes shrewd investors should capitalize on subdued sentiment around gold ETFs like GLD, IAU and GDX before the next bull cycle kicks into high gear:
Gold prices are up 8% year-over-year, despite sliding nearly 2% since January amid mixed economic data
Buoyant reports on GDP growth, manufacturing activity and inflation have tempered expectations of imminent Fed rate cuts
Still, gold has held the $2,010-$2,020 / oz range on healthy longer-term demand drivers
“I’d call the recent resilience in gold a high-quality rally,” Tobi mentioned. “The lack of ETF excitement is an opportunity – it leaves plenty of sidelined money ready to chase prices when uptrends accelerate.”
Investors should also keep an eye on the geopolitical landscape, which can significantly impact gold prices. Rising tensions between major countries, conflicts in resource-rich regions, and global supply chain disruptions could all potentially boost safe-haven demand for gold. And with central banks continuing their gold-buying sprees – Russia in particular has been aggressively accumulating bullion – there is underlying support for prices.
In addition, jewellery purchases in India and China often ramp up heading into wedding seasons and cultural festivals. Any revival in retail demand from these gold-loving countries provides further impetus.
So while gold ETFs may lack some sparkle now, their fortunes could rapidly improve if inflation persists or growth cools more meaningfully. Savvy investors would do well to capitalize on the lull to position for the next leg up.