Gold ETF investors rejoiced after Federal Reserve Chairman Ben Bernanke spoke this past week. As the world now knows, the Federal Reserve finally decided to outline a new round of financial liquidity actions. This boosted gold ETF shares, adding even more gains to previous weeks when the anticipation of a liquidity event was building.
Here's the chart showing Thursday's reaction in physical gold and gold stock ETFs. Gold stock ETFs shown are the Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDXJ).
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Google FinanceThe SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) gained 2% for the week. Here's a snapshot of the GoldETFs.biz gold ETF grid displaying the weekly performance of the physical gold fund category.
GoldETFs.bizHandily dubbed by many as QE3, the Fed will continue Operation Twist and now begin to purchase $40 billion of mortgage debt a month going forward. This program is open ended according to the Fed and is ultimately designed to increase U.S. financial liquidity. Secondarily this action will combine with the European Central Bank's (ECB) actions to create a massive wave of global liquidity pushing investors to "risk on" mode and creating demand for scarce assets like precious metals.
GOLD ETF PRODUCTS HIT DOUBLE DIGIT GAINSYear to date, physical gold ETF products have now gained double digits based off this ideal environment for the yellow metal. Here's the 2012 performance grid snapshot.
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GoldETFs.bizGold ETF products, both physical and stock based, have had a fantastic run upward over the last month based off the anticipation and realization of increased liquidity from various central banks. Going forward into the week of September 17th, gold could easily take a pause after this run or be chased by more investors anxious to potentially ride gold ETF products to new all time highs.
A quick review of the CBOE's Gold ETF Volatility Index (GVZ), shows that gold ETF volatility has risen over the last month but has dropped noticeably in the last week. This may indicate that gold is in for smaller moves in the near future. Here's the three month chart for perspective.
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CBOE data
Going forward gold ETF gains are likely to be tested at some point due to their speed and magnitude. Longer term however gold ETF investors appear to be well positioned as printing presses and the rate of bond buying has been turned up a notch by central banking officials around the world making gold's scarcity an even more appealing characteristic.
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 is Publisher of gold ETF site GoldETFs.biz.
