However, I think gold bugs had better beware because trading volume in gold is dropping fast. For example, a popular way to buy gold is through the SPDR Gold Trust ETF (NYSE:GLD), which has dropped from average volume of 25 million shares a day during the liquidity crisis to 5 million shares a day this week. The SPDR Gold Trust ETF buys gold bullion and then sells shares to investors as a stock.
If you are interested in learning more about investing in commodity ETFs click here.
There are a lot of traders holding gold investments right now and a decline in prices could lead to a feedback cycle of these investors dumping their shares as prices drop past stop losses. Gold prices are known for sudden and dramatic shifts in price, so this is definitely a situation that traders will want to be very careful.
John Jagerson is a co-founder of Learning Markets, LLC. Learning Markets offers daily articles, videos and investing guides about everything from investing in stocks and options to trading currencies in the forex market and more.
Reader Comments (Page 1 of 1)
8-20-2009 @ 6:12PM
ij70 said...
Notice that the author is talking about ETFs, electronic traded funds. There are people that are afraid that ETFs do not have enough physical gold to cover the transactions. What would such people do? They would sell the ETFs and not buy anymore, this would also lead to drop in volume.
Another item is that IRS is making waves about precious metals in IRAs. That would also make people buy other investments which would lead to low volume.
8-20-2009 @ 6:23PM
Sheldon L said...
ETF = Exchange Traded Fund
8-21-2009 @ 8:58AM
Dan Barnett said...
But you must admit that ij70 has a point. Given Madoff & the other recent scandals; a level of trust in the ETF is required. Holding the actual gold in your own hands is the alternative & if either Mr. Jagerson or Mr. Liber know a way to measure that figure it would be instructive.
Alternatively, gold has had it's run up & hasn't climbed significantly in a while. The stock market isn't crashing anymore. The much-balyhooed inflation hasn't arrived. Maybe gold simply isn't as attractive these days.
8-21-2009 @ 9:05AM
franco parilo said...
I buy the physical gold and silver. These clowns want you to invest in the Ponzi scheme known as the 401-k or the IRA. They've ripped of the first generation of investors, now they are working on the second generation. from here on out it's nothing but precious metals and CD's for me.
8-21-2009 @ 9:07AM
catherine pierce said...
Gold NEVER loses it's luster. The Fed and the President have to put the dollar back on the gold standard to stop this economic free for all. They have to be accountable for printing dollars and spending and backing the dollar with gold is the only way to do this. then The Fed needs to be audited! join these two movements to get something positive accomplished and to take the power away from Congress and The Fed: FairTax.org and auditthefed.us
8-21-2009 @ 9:13AM
wade said...
think you all better sell I bought at 277.00 a oz in 98 and sold it first time it broke 1000.00 buying at this high price is crazy. sell sell sell.............lol before it goes back down
8-21-2009 @ 9:28AM
sadams8174 said...
When the market digest the true numbers on Wall street, gold will soar. The obama administration is releasing info on the economy touting a recovery. However thes numbers will be found to be artifical, and short lived. Resulting in a double dip, because these policies are meant to skew the numbers in the short term, so that the administration could have an easier time trying to push his agenda such as healthcare and cap and trade.
8-21-2009 @ 12:19PM
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8-21-2009 @ 12:20PM
Teve said...
I would like to see the price drop so I could buy more gold.
I don't buy paper gold I buy hard coin and pay cash for it and there is no paper trail and vendors still want a
premium over spot its not loseing its luster it just people don't trust paper.
8-21-2009 @ 1:33PM
Charles Boardman said...
It does not hurt to own a bit of gold in the form of coin. Value never goes to zero.
8-21-2009 @ 2:41PM
DOLLY said...
Is it better to invest in gold or should I invest in Time/Warner/CNN?
8-21-2009 @ 2:56PM
MyKisa said...
....nobody is buying gold, that is why the mint won`t produce anymore
8-21-2009 @ 2:56PM
MyKisa said...
...consider that IMF bases gold value at $40.00 before you put too much into gold...govt has been a bit sneaky before ya know
8-21-2009 @ 3:28PM
Paul said...
Yea!! Gold is losing its luster and toilet paper(money) is the new standard every idiot is investing in. Sheepish Idiots. Invest in manure, at least it will grow something!