Monday, February 1, 2016, witnessed a massive purchase of 12,196 tons into the SPDR Gold Shares ETF (GLD). The price of GLD, however, leaped by a marginal 1% following the similar rise in gold futures for April. The holdings of GLD currently stand at 681,425 tons. The massive purchase was responsible for gold’s rise.
GLD saw an outflow of almost 66 tons over the whole of 2015, and it already saw about 22 tons in the first three weeks of 2016. According to January 26, 2016, reports by the CFTC (Commodity Futures Trading Commission), the managed money long position on gold has been substantially greater than the short positions, and investors have long net positions in gold.
Miners built muscle
The rise in gold was also extended to mining stocks like Primero Mining Corporation (PPP), Yamana Gold (AUY), and Coeur Mining (CDE). These three stocks have risen by 8.1%, 11.8%, and 15.3%, respectively, during the past five trading days, as of February 2. Increases in prices for precious metal prices are often beneficial for these mining-based companies, as their profit margins get a boost from higher prices of their core assets.
Together, the three companies contribute about 5.3% to the price changes in the VanEck Vectors Gold Miners ETF (GDX). GDX has gained by 2.4% on a five-day trailing basis as of February 2.
Gold still bullish?
The overall sentiment for gold still seems bullish as the global tumult is playing its game. Gold may, however, face some resistance at $1,130, the high it saw on Monday, February 1. The Fed may also get even weaker in the knees with a global scenario that is shooting southward and promises to hamper growth across the US economy, and this appears to explain the Fed’s most recent decision to postpone another rate hike and give further breathing room to gold.
Continue to the next part for a continued discussion of the role of lower interest rates in the price of gold.