Gold Rises As Stock Rally Fades; Outlook Seen Bright For Second Half
New York (July 13) Physical gold and gold stock ETFs surged on Wednesday as the stock market rally faded and hopes for more economic stimulus whet investors' appetite for the commodity.
Gold prices were trading higher "on a corrective bounce as traders are once again 'buying the dip' " after a solid two-day sell-off, Jim Wyckoff, a Kitco senior technical analyst, wrote early Wednesday.
Wyckoff added: "On Thursday, the Bank of England (BOE) meets to discuss U.K. monetary policy. Some believe the BOE will move to lower interest rates at the meeting, following the recent Brexit vote." Britons' June 23 vote to leave the European Union shocked financial markets and triggered a global stock plunge.
Meanwhile, Japanese Prime Minister Shinzo Abe this week ordered more fiscal stimulus.
Officials at the Federal Reserve also recently indicated they're still cautious on raising interest rates despite better-than-expected jobs data. A longer period of historically low interest rates is viewed as a boon for gold, which must compete against other interest-yielding assets in the market.
The earnings slowdown and stock market volatility are the top two concerns of financial advisors for the second half of 2016, according to a mid-year survey by State Street Global Advisors.
"Advisors and investors can find a variety of low-cost products offering exposure to assets that mitigate those concerns," including gold, investment-grade corporate bond and low-volatility equity exchange traded funds, said Todd Rosenbluth, director of ETF research for S&P Global Market Intelligence. He noted those ETFs were also popular for risk mitigation in the first half of 2016.
GLD has seen $12.9 billion in net inflow of investor money year to date -- more than any other ETF, according to SPDR ETFs.
Major stock ETFs were struggling to hold on to recent gains in early Wednesday trade. The S&P 500 and Dow Jones industrial average rose to all time highs this week.
Defensive sectors led the S&P 500 Wednesday. Health care, utilities and consumer staples jostled for the biggest advance, while energy contributed most to the decline.
Source: NASDAQ.com
