ETF Talk: Is Gold Going to Glitter Soon?

With the Fed loosening the money spigot through interest rate cuts and other monetary tools, inflation is becoming more of a concern for investors. When that happens, gold often becomes a safe haven investment.

If you are thinking about investing in gold, I advise caution for now. Gold is showing no clear sign of an upward trajectory. With the economy appearing to slow, inflation is not the only threat on the financial radar screen. Sure, you can keep potential gold investments in mind for when the time is right. But I personally don’t think that window of opportunity has opened yet.

For those looking to find gold-oriented funds to buy, I have uncovered four for you to keep on your personal "watch list." Two of the funds, SPDR Gold Shares (GLD) and iShares COMEX Gold Trust (IAU), are exchange-traded funds (ETFs) that go long on gold. Another is Market Vectors Gold Miners (GDX). The PowerShares DB Gold Double Short (DZZ) is an exchange-traded note (ETN) that is a double bet against gold.

Should you rule out any exposure to gold right now? Well, that call is up to you. I like to see 200-day moving averages go in favor of an investment before I recommend it, and gold does not meet that standard just yet. Indeed, the price of gold has fallen sharply recently. The price of gold had slipped to $743.27 an ounce, down $23.93 an ounce, by 11:40 a.m. EDT today. In addition, the price of gold has fallen 20% since topping out earlier this month at $918 on Oct. 9.

What happened? Well, the gold sector can become overbought at times — especially when investors look to protect themselves from inflation. Many traders jump into and out of gold investments within just hours or days. Such trading creates volatility that is disconnected to fundamentals. A rising dollar also can hurt gold prices and that factored into the commodity’s decline in value this month.

I understand that many investment commentators consider gold to be a hedge against the current market volatility. Well, the price of gold has not held up. This situation may change, but it hasn’t yet. For that reason, it seems premature to make a big bet on gold.