What's Holding the Gold ETF Back?


". . .inflation has replaced market fear as the main concern for investors at this point."

Fears about the economy have been slowly abating, yet gold exchange traded funds (ETFs) and the metal itself haven't shown many signs of waning interest. What's happening here?

Many analysts say that the precious metal is expected to keep trading above the $900 per ounce mark, and the prospects for the $1,000 mark are good, as inflation fears are mounting. An anemic U.S. dollar and global economic stimulus has the possibility for inflation higher than usual.

Allen Sykora for The Wall Street Journal reports that stocks are up from their previous lows and the banking sector fears are not as pronounced, so inflation has replaced market fear as the main concern for investors at this point.

If inflation rates rise as much as some analysts expect, gold is one market whose prices are likely to go up in line with inflation rates. China has been stocking up on gold bars, and overall investor demand is up. In the first quarter of 2009, these fears drove total demand 38% higher from a year ago, according to figures from the World Gold Council.

Silver has shared some of the spotlight with gold, outpacing its 2009 highs already. According to analysts, gold could outperform other markets if the perceived inflation threat becomes a reality.

Be sure to have a strategy in place when you decide to enter into the market, or have an exit strategy ready if you are already invested.

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