Gold exchange traded funds seem to be coiling for their next big move with the precious metal's price hovering around $1,700 an ounce in March.
Whether gold next sees $1,800 or $1,600 an ounce this year depends largely on the outlook for more quantitative easing from the Federal Reserve.
Loose monetary policies from the Fed and other central banks have been a major driver of the historic rally in gold the past few years. Many investors view gold as a hedge against currency debasement.
Investors in gold ETFs are sending bullish signals on the precious metal. ETF bullion holdings are at a record high of more than 2,400 metric tons.
In fact, gold ETF investors haven't been shaken at all by the steep pullback on Feb. 29 when prices lost as much as $100 an ounce.
"Normally a big drop in gold prices will send gold ETF investors heading for the sidelines, but there was nary a reaction to that big drop," according to the McClellan Market Report. "In fact, total assets in GLD and IAU, the two biggest gold bullion ETFs, actually rose slightly that day, and have continued upward in the days since then. It is as if investors viewed that sell-off as more of a buying opportunity than a reason for worry."
Investors with a bearish outlook on gold can also use ETFs to profit from declines or hedge. Inverse ETFs that short gold include ProShares UltraShort Gold GLL, PowerShares DB Gold Double Short ETN DZZ, PowerShares DB Gold Short ETN DGZ and VelocityShares 3X Inverse Gold ETN DGLD. Some of the funds use leverage, which means more volatility.
ETFS Physical Swiss Gold Shares
Disclosure: I am long GLD. Tom Lydon's clients own GLD.