Gold Price Dip and ETFs

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 |  Includes: DZZ, GLD, GLL, SGOL
by: Tom Lydon

Gold prices have been on a seemingly unstoppable run in the last few months, but it suddenly seems to be on pause. ETFs can give you the opportunity to capitalize, no matter what gold’s next move happens to be.

Gold’s decline is part of a ripple effect emanating from last Friday’s unemployment report, which showed a 0.2% decline in November from October. Those numbers have investors betting that the Federal Reserve could raise rates, which is pushing the dollar higher, reports Devon Maylie for The Wall Street Journal. A strong dollar makes gold priced in dollars more expensive for overseas buyers.

If gold continues to decline, short gold funds can help investors hedge the losses. Read up on leveraged and inverse ETFs before you buy to understand how they work. Some options include the ProShares UltraShort Gold (NYSEArca: GLL) and PowerShares DB Gold Double Short (NYSEArca: DZZ).

How much do various factors influence the price of gold today? Reports Julian D. W. Phillips for Goldseek has some answers:

  • Oil prices. Oil’s price as an indicator of gold prices is in question. As oil prices shot to nearly $150 a barrel in 2008 before plummeting to $35, gold prices didn’t budge.
  • The exchange rate. On a day-to-day basis, the strength or weakness of the U.S. dollar can trigger movements in gold’s prices.

Gold is breaking away from all currencies, so to speak, and becoming a major measure of the entire global system at large.

Overall, this is what led gold to the high it has experienced and as central banks are turning to gold and buying it up, but gold’s next move is up to them.

  • SPDR Gold Shares (NYSEArca: GLD): up 31.5% year-to-date
  • ETFS Physical Swiss Gold Shares (NYSEArca: SGOL): up 6.2% in the last month