Can Gold Keep Rolling with the Macroeconomic Punches?

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Part 5
Can Gold Keep Rolling with the Macroeconomic Punches? PART 5 OF 6

What GLD’s Fund Flows amid Current Instability Could Mean

Gold-following funds

After markets hurried back to gold following the GOP’s healthcare bill flop, investors flooded the famous gold-based SPDR Gold Shares ETF (GLD). GLD reported an inflow of 2.7 tons on Monday, March 27.

GLD has seen a rise of 8.6% since the beginning of 2017, closely tracking the performance of the precious metal. The other two gold-tracking funds, the iShares Gold Trust (IAU) and the Physical Swiss Gold Shares (SGOL), also saw similar returns.

What GLD&#8217;s Fund Flows amid Current Instability Could Mean

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GLD has been the most traded among the above funds, however. The ETF is now trading close to $118, and a breach of $120 could be a sign of increased bullishness toward gold. On Tuesday, March 28, we saw an outflow of 1.8 tons.

Economic indicators

The performance of precious metals, especially gold, looks positive now, considering that the interest rates on Treasuries recently rose. As precious metals are non-yield bearing assets, they tend to underperform in rising interest rate environments.

But the drifting US dollar over the past few months has been a critical driver behind the rise and fall in the price of dollar-denominated precious metals.

The mining shares that felt a considerable impact from the fluctuations in the price of gold include AngloGold Ashanti (AU), Eldorado Gold (EGO), Kinross Gold (KGC), and IamGold (IAG). These four shares experienced losses over the past five trading days, despite the rise in gold, and so while most of the time, mining companies follow gold, they can deviate based on the future viability of the metal.

In the next and final part of this series, we’ll look at the specific market reactions to these events on Tuesday, March 28.


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