Gold ETFs surged significantly on Wednesday as new Federal Reserve minutes sparked hopes of another round of liquidity. This dovish tone rocketed the largest physical gold fund in the world, the SPDR Gold Trust (GLD), close to 1.5% above its trading levels before the release. Other gold stock focused ETFs like the Market Vectors Gold Miners ETF (GDX) experienced even larger gains. It was interesting to note that both forms of gold ETF funds - physical and stock based - easily outperformed the S&P 500 for the day. Here's the annotated chart from Yahoo Finance showing Wednesday's behavior of GLD, GDX and the S&P 500 ETF (SPY). (click to enlarge)
SPY finished the trading day with a slight gain while the gold ETFs were up exponentially in comparison. To view all gold ETF and ETN performance on one sortable page, check out the gold ETF list on GoldETFs.biz.U.S. Dollar Weakens
Take a look at the performance of the Dollar Index Bullish ETF (UUP) Wednesday versus GLD. While UUP measures the U.S. Dollar's strength relative to a basket of other developed currencies, it can also be used as a proxy for the U.S. Dollar in terms of directional movement. Here's the chart.(click to enlarge)
Gold shares are on fire right now but this is based off expectations that the Federal Reserve will act in September. Investors have been burned by these same expectations several times since the end of this February. Will this time be any different? Whatever the outcome, investors should remain cautious about this latest rally in gold as disappointment could be right around the corner.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Christian Magoon publishes GoldETFs.biz.