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TheStreet Open House

Four ETFs May Reap Benefits of Gold's Rise

NEW YORK ( TheStreet) -- As sovereign debt concerns continue to emerge and the U.S. continues to implement a loose monetary policy resulting in an increased money supply, gold continues to glimmer surpassing $1,400 an ounce and giving support to SPDR Gold Shares (GLD), PowerShares DB Gold Fund (DGL), ETFS Physical Swiss Gold Shares (SGOL) and the Market Vectors Gold Miners ETF (GDX).

Gold futures contracts for December delivery hit an intraday price of $1,410.40 an ounce in electronic trading and the front-month November contract rose to $1,402.80 an ounce as investors fled to the precious metal's safe-haven appeal. Costs of insuring against bond defaults on the sovereign debt of Ireland, Portugal and Spain continue to rise amplifying the enhanced risks in the region and the likelihood of default, which provided positive price support to gold.

Furthermore, concerns of currency devaluations around the world are boosting gold. The recent announcement by the Federal Reserve to launch a $600 billion program to purchase Treasuries is expected to increase money supply and further devalue the U.S. dollar. Additionally, many investors are concerned that banks will remain reluctant to lend which could potentially backfire against the Fed and have an even further devastating effect.

At the end of the day, fear in the global markets and currency devaluation are driving the price of gold bullion and are likely to remain prevalent in the near future.

  • SPDR Gold Shares is the most actively traded gold ETF and moves in tandem with the price fluctuations of gold bullion;
  • PowerShares DB Gold Fund gives exposure to gold through futures contracts;
  • ETFS Physical Swiss Gold Shares is backed by physical gold bullion;
  • Market Vectors Gold Miners ETF is an equity play on gold and includes holdings of companies that primarily derive their revenue through the mining and exploration of gold and other precious metals. Some holdings include Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM).

Written by Kevin Grewal of Smartstops in Houston.

Grewal has no positions in the securities mentioned.

Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net , where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.

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