Gold Shines Bright - For Now

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Includes: DGL, DGP, GLD, GLDI, IAU, OUNZ, SGOL
by: Kapitall

By Mary-Lynn Cesar

Gold futures reached a 13-month high this week. But are gold's days at $1,000-plus per ounce numbered?

Gold is the glittering comeback kid of 2016. The precious metal has climbed around 20%, making it the best-performing major asset of the year so far.

This has, of course, been a boon for gold investors. As one example, the triple-leveraged (meaning its gains and losses are thrice that of the underlying index) Direxion Daily Gold Miners Index Bull 3x Shares ETF (NYSEARCA:NUGT) is up roughly 160% since the beginning of 2016.

And we saw a new high for gold this week. After initially falling following the European Central Bank's announcement that it plans to cut key interest rates and increase quantitative easing (QE), gold futures were up again by market close on Thursday. MarketWatch reports gold for April delivery closed at $1,272.80 an ounce, the highest level since February 2015. By Friday, gold was down 1% to $1,259 an ounce as stocks rebounded in the wake of the ECB's stimulus measures.

Gold is often viewed as a safe-haven investment amid market turbulence, a condition that has been all too familiar to investors this year. Often, when the stock market is down, gold is up, and when stocks rally, gold falls (although this is not always the case, as demonstrated by gold's performance since mid-February - up 6% - while the S&P 500 climbed 10%).

The bullion fetched a record $1,921.41 an ounce in 2011 as fears of a global downturn mounted, buoyed by concern over Japan's likelihood of entering a double-dip recession. 2011 was another volatile year for U.S. stocks, particularly after August's first-ever S&P downgrade of U.S. debt.

But gold's glory was relatively short-lived, and the precious metal posted annual declines from 2013 through 2015, as the equities bull run continued. Between April 2013 and August 2015, physical gold bullion funds lost over $52 billion in value. And while gold was in a bear market in 2014, stocks were in a bull market through the end of the year: the Dow Jones was up 7.5%, the S&P 500 was up 11.4% and the NASDAQ was up 13.4%.

Yet, even with the current market volatility, investing in gold is far from a sure bet. Goldman Sachs, adopting a bearish stance, predicted in February that gold prices will fall to $1,000 an ounce by the end of this year, as a stronger U.S. economy leads to higher interest rates, driving investors away from gold and toward interest-bearing investments like bonds. If the bank is right, that would be gold's lowest price since fall 2009. Veteran trader Dennis Gartman is in the bullish corner; Gartman told CNBC that so long as central banks continue with expansionary monetary policy - such as the ECB's Thursday announcement - gold will continue to rally. Even more of a reason to pay attention to the Federal Reserve's meeting next week.

For investors who are interested in adding gold to their portfolios, it may be worthwhile to consider gold exchange-traded funds (ETFs), which can be easier to manage than direct investments in physical gold. The following list consists of seven gold ETFs that are rallying above their 20-day, 50-day and 200-day simple moving averages (SMAs) and are trading within 3% of their respective 52-week highs as of 1:45 PM EST. This combination suggests that the ETFs have strong upward momentum, though past performance isn't a guarantee of future success.

Click on the interactive chart to view data over

1. PowerShares DB Gold ETF (NYSEARCA:DGL): Net assets at $145.13M, most recent closing price at $41.54. DGL is rallying 1.79% above its 20-day SMA, 8.35% above its 50-day SMA, and 10.57% above its 200-day SMA. The ETF is trading 1.58% below its 52-week average.

2. DB Gold Double Long ETN (NYSEARCA:DGP): Net assets at $130.49M, most recent closing price at $25.85. DGP is rallying 4.85% above its 20-day SMA, 18.49% above its 50-day SMA and 23.07% above its 200-day SMA. The ETF is trading 2.26% below its 52-week average.

3. SPDR Gold Trust ETF (NYSEARCA:GLD): Net assets at $30.85B, most recent closing price at $121.50. GLD is rallying 1.66% above its 20-day SMA, 8.23% above its 50-day SMA and 10.66% above its 200-day SMA. The ETF is trading 1.63% below its 52-week average.

4. Credit Suisse Gold Shares Covered Call ETN (NASDAQ:GLDI): Net assets at $35.6M, most recent closing price at $10.99. GLDI is rallying 1.41% above its 20-day SMA, 3.41% above its 50-day SMA, and 3.99% above its 200-day SMA. The ETF is trading 1.63% below its 52-week average.

5. iShares Gold Trust (NYSEARCA:IAU): Net assets at $98.91M, most recent closing price at $12.27. IAU is rallying 1.63% above its 20-day SMA, 8.20% above its 50-day SMA, and 10.70% above its 200-day SMA. The ETF is trading 1.82% below its 52-week average.

6. Van Eck Merk Gold ETF (NYSEARCA:OUNZ): Net assets at $145.13M, most recent closing price at $12.62. OUNZ is rallying 1.64% above its 20-day SMA, 8.20% above its 50-day SMA, and 10.62% above its 200-day SMA. The ETF is trading 1.13% below its 52-week average.

7. ETFS Physical Swiss Gold Trust ETF (NYSEARCA:SGOL): Net assets at $939.15M, most recent closing price at $123.95. SGOL is rallying 1.69% above its 20-day SMA, 8.29% above its 50-day SMA, and 10.75% above its 200-day SMA. The ETF is trading 1.54% below its 52-week average.

ETF price sourced from Zacks Investment Research. All other data sourced from FINVIZ.