Gold Price: Quantitative Easing Already Priced To The Market?
Many investors have turned to holding long positions on gold, with a view of hedging against inflation amid quantitative easing and currency devaluation. However, the information the decisions are based on might not be new to the market. Historically, gold prices have always been pegged to currency devaluation and quantitative easing, meaning that this fact is already factored in the current market price for gold.
This is the same reason gold prices have on several occasions gone against such events with reactions lasting for short periods due to hyped demand for the commodity.
Nonetheless, the question begged is why investors are using this information as if it were new and subsequently, investing based on conclusions drawn from it? Notably, QE and currency devaluation by way of printing more money are the same. It is the definition, which is quite theoretical as sometimes the exercise is branded as buying of treasury securities.
The current gold QE III gold rush has led to some major movements in gold ETFs. For instance, SPDR Gold Trust (NYSEARCA :GLD), which holds more than $74 billion worth of assets under management, is up 8.1 percent over the last three months, same as iShares Gold Trust (NYSEARCA: IAU), and ETFS Gold Trust (NYSEARCA: SGOL). However, ETFS Asian Gold Trust (NYSEARCA: AGOL) remains unchanged for the three month period.
Subsequently, SPDR Gold Trust and ETFS Asian Gold Trust, have experienced an increase in volume movements, with a 10 day moving average up 33.5, and 41 percent respectively. On the other hand, iShares Gold Trust and ETFS Gold Trust registered declines of 25.8, and 59.55 percent respectively.
On Tuesday, one ounce of gold traded at $1,713.58. The commodity is up 5.23 percent from Monday's close, but down 3.85 percent for the 30-day period.
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