Gold ETF products focused on physical gold fell slightly for the week ending February 10th. This brings physical gold ETFs to a 10% gain in 2012 - a bit more than gold's return for the entire year of 2011. Here's the performance chart showing all physical gold ETFs listed in the United States.
The iShares COMEX Gold Trust (NYSEARCA:IAU) leads physical gold ETF performance this year, likely due to its peer group low expense ratio of 25bps. Right behind IAU is the world's largest gold ETF, the SPDR Gold Trust (NYSEARCA:GLD). The performance difference is likely due to GLD's expense ratio, the highest of all physical gold ETFs at 40bps.
Technically gold, as represented by GLD, is above its 100 day moving average but well within its 2 year trading range. Here's the chart comparing GLD's price to its 100 day moving average over the last 24 months.
A variety of factors influenced the price of gold over the last week - but the chief one was the most infamous of nations lately, Greece. A flare up in the Greek debt drama pulled gold down Friday as doubt emerged that Greece would be able to meet the conditions to achieve a second bailout. A disorderly default by Greece would push down the Euro and strengthen the U.S. dollar, a bad outcome for gold prices. Other country specific data influenced gold prices this past week as well. The second largest consumer of gold, China, reported decreased gold demand in January, although this may be due to their holiday season. Regardless concerns of a slowdown in China's gold consumption and economy weighed on the markets. The third largest consumer of gold, India, reported an uptick in demand for gold as the country has been on the mend from a 2011 bout of inflation and currency devaluation. Meanwhile, the U.S. continued to report positive economic data which should be a positive for gold prices as a healthy U.S. economy means more gold jewelry purchases, the largest driver of gold demand.
Gold stock ETFs had a much rougher week than physical gold ETFs. These ETFs were off between 3% - 5% for the week. Gold stock ETFs are more volatile in nature so these numbers weren't surprising given gold's downward move. Still the junior gold miners ETF (NYSEARCA:GDXJ) has gained over 13% for the year after a dismal 2011. This is a reversal relative to the large cap gold miners ETF (NYSEARCA:GDX) which outperformed GDXJ in 2011but is being more than doubled in performance by GDXJ in 2012. Here's the performance chart of all gold stock ETFs listed in the United States.
Going forward it appears that the biggest risk to gold is a disorderly outcome in Greece. This would send investors towards the U.S. dollar, strengthening it significantly. As gold is priced in U.S. dollars, a stronger dollar means gold is worth less dollars. All eyes will be on Greece in the coming days to weigh the latest developments. Finally, in the short term gold may become a victim of its own success. Its initial 2012 bull run and recent pullback may leave some investors taking profits off the table.