The advent of gold ETFs, which are physically backed, has given investors an easier, safer and faster way of buying gold. The most popular, SPDR Gold Shares (GLD), currently has 1,286.35 tons in its holdings, which is slightly less than its record of 1,289 tons. If investor demand outpaces available shares, more gold must be added to issue new stock. Shares were lower by 0.47% to $120.90.
Another popular theory for strong gold price movement is central bank buying. Since the second quarter of 2009, central banks from emerging market countries like India and China have been reallocating their reserves with a strong push into gold. India and China hold 6% and 1.5% respectively as compared to the U.S. which holds 74% of its reserves in gold. Recently Iran joined this trend announcing it would sell €45 billion for U.S. dollars and gold.
Central banks typically never announce when they are buying gold for fear of moving the price higher but when they buy they typically purchase in large quantities and could be a possible factor in big price swings.
Double-digit price gains work both ways, however, some analysts believe that when the crisis premium, or fear trade, comes out of the gold market, prices could plummet to $800 an ounce."As the global macroeconomic environment stabilizes we continue to expect a significant decline in gold prices," says Michael Crook, vice president and strategist at Barclays Wealth. "