Gold ETFs (GLD) Slide, Correction to Continue?

GOLD ETFS & GLD NEWS – Gold ETFs fell Monday as the SPDR Gold Trust (GLD) slid 0.3% to $169.48 per share. The sell-off in the GLD, the largest of the gold ETFs, came as the yellow metal dropped $6.96 to $1,739.96 per ounce.

With today’s move lower, gold ETFs are on pace for their third consecutive day of losses. Since reaching an all-time record high of $175.13 on August 10, the GLD has retreated 3.2% alongside gold bullion. However, on a year-to-date basis, the GLD and other gold ETFs that serve as proxies for the yellow metal remain higher by 22.2%.

TD Securities presented its outlook for precious metals in a note to clients this morning, and discussed several factors likely to impact gold ETFs such as the GLD. “Despite the very gold-favourable macroeconomic fundamentals and bullish sentiment towards the yellow metal (especially retail investors), TDS expects the current correction to continue in the near-term,” the firm wrote. “As per our prediction in the short-term version of our report yesterday, gold is down some $80/oz from recent highs, and an additional $40-60/oz downside move is very possible given the recent trading history.”

“Reminiscent of silver after its parabolic rise, gold, which has jumped about 12% in August alone, is set to continue its correction over the short-term,” TD continued. “Moderating momentum, higher spec margins, a sharp jump in implied volatilities and a small improvement in investor risk appetite are the key catalysts to drive gold lower.”

However, TD reiterated its longer-term positive stance on the gold sector. “We are bullish on the yellow metal longer term, with prices expected to come within $2,000/oz territory in the coming months.”

The firm also noted that its commodities team “agrees that there is a risk the Fed and other central banks may be forced to take additional steps to help the economy grow. This represents a danger that they may miscalculate at some point and once again release the inflation genie out of the bottle. Of course, it also means that the real cost of holding gold may very well drop, which increases demand for the asset, as monetary authorities engineer tighter treasury/long term bond spreads in order to promote lending.”

While gold ETFs such as the GLD declined Monday morning, gold equities held firm. The AMEX Gold Bugs Index (HUI) inched higher by 0.1% to 565.36. Notable advancers included AngloGold Ashanti (AU), Yamana Gold (AUY), and Gold Fields (GFI). AU, AUY, and GFI rose 0.8%, 0.3%, and 0.2%, respectively.