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July 02, 2015 at 06:23 AM
Gold is routinely and proudly declared a “safe haven.” But it hasn’t been very safe in 2015.
While mainland Chinese stocks (ASHR), also known as A-shares, have crashed around 20% from their peak and Greece’s perilous economic collapse is jolting global financial markets, gold has lost almost 1.5% over the past month.
It’s during times of economic instability when gold’s performance is expected to shine. But as Asia and Europe’s problems fester, it’s done little to lift gold prices.
Lower Prices Ahead?
From a purely technical angle, the price action in gold doesn’t look very bullish. In May, the SPDR Gold Trust (GLD) fell below both its 50- and 200-day moving average. This is a definite sign of weakness, and it also means that gold prices are still searching for a bottom.
After two consecutive years of net selling, the World Gold Council reported a modest uptick in asset flows into gold ETFs during the first quarter to 25.7 million tons.
The two largest U.S. listed gold ETFs by assets are the SPDR Gold Trust with $26.89 billion and the iShares Gold Trust (IAU) with $6.34 billion. Both funds own physical gold bullion which is stored in secure vaults.
Late last year, GLD hit a closing low of $109.79 on Nov. 5 and any breach below this supporting level could spell more downside ahead for gold.
False Protection
Gold’s allure and alleged safety has been promoted by both cable network doomsayers and the myth that central bank monetary stimulus is good for gold prices.
