Gold ETFs Gain As Dollar Weakens After EU Pact

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Includes: AGOL, DGL, DGP, DGZ, DZZ, FXE, GLD, GLL, IAU, PHYS, SGOL, UBG, UGL, USO
by: John Spence

Gold exchange traded funds were set to open the week with a 2% rise on reports of a banking sector recapitalization in Europe, while the euro strengthened against the U.S. dollar.

SDPR Gold Shares (NYSEARCA:GLD) was up 2% in preopen trade Monday. German Chancellor Angela Merkel and French President Nicolas Sarkozy will submit a plan to recapitalize European banks and address the debt crisis in Greece by the Nov. 3 Group of 20 summit, Bloomberg reported.

Gold prices finished last week with a slight gain and stocks rallied on hopes leaders in Europe will take the necessary steps to deal with the sovereign debt crisis.

In currency ETFs, CurrencyShares Euro Trust (NYSEARCA:FXE) vaulted 1.7% in Monday’s premarket following the pledge from France and Germany over the weekend. The dollar weakened and investors bid crude higher – U.S. Oil Fund (NYSEARCA:USO) rose 2.5%.

Gold ETFs have consolidated after their big correction in September.

The precious metal funds have been volatile but that hasn’t shaken the confidence of long-term gold bulls.

“People are thinking the newsflow is only beneficial in the short term. Europe still has to get its act together on a much longer-term basis,” said Credit Agricole analyst Robin Bhar in a Reuters report.

“While a detailed plan was lacking, we view any progress on bank recapitalization as a positive for gold,” added UBS in the article. “Typically liquidity concerns and funding issues are not gold’s friends.”

SPDR Gold Shares


Disclosure: Tom Lydon’s clients own GLD.

Read the disclaimer: Tom Lydon is a board member of the funds for Rydex|SGI.