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Did Strong Data Push Gold Prices South?

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Oct. 23 2015, Published 11:56 a.m. ET

Economic data

Gold showed a little price fluctuation and traded in a narrow range of $1,161–$1,171 per ounce on Thursday, October 22, 2015. On the economic front, US unemployment claims came in at 259,000, beating the estimate of 266,000. This was slightly higher than the previous reading of 255,000.

On the housing front, existing home sales impressed with a strong surge, increasing to 5.6 million, well above expectations. The data weren’t as strong as expected, but the key figures are sending some mixed messages to investors who have their eyes fixed on the Fed’s rate hike.

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Gold-backed ETFs

Another important dimension when considering gold investments is gold-backed ETF investments. ETF holdings have seen massive outflows. They’ve fallen by more than 40% to around 42 million ounces from record highs above 76 million ounces in December 2012.

The SPDR Gold Shares ETF (GLD) and the iShares Gold Trust (IAU) have marginally lost 1.6% and 1.5%, respectively, on a year-to-date basis. The recent surge in gold prices in the last month has also buoyed gold-backed ETFs.

Agnico Eagle Mines (AEM), Royal Gold (RGLD), Kinross Gold (KGC), and Randgold Resources (GOLD) have gained 25.8%, 9.4%, 13%, and 22%, respectively, on a trailing 30-day basis. These four companies contribute 17.4% to the VanEck Vectors Gold Miners ETF (GDX). GDX has gained 21.6% on a trailing 30-day basis.

None of the economic data released in the United States supported the hawks or the doves on the Federal Open Market Committee to raise rates for the first time in nine years. Gold prices don’t seem to have caught up with interest rate expectations, which have gone from 1.5% at the start of the year to about 0.5% today. The loosening monetary policy has probably worked in favor of gold.

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