Just a few weeks after Paulson & Co. sold off more than half of its holdings in the SPDR Gold Trust ETF (GLD) in the second quarter, investors are moving back into the precious metal.
GLD is trading up about 0.5% on Friday and should end the week up about 2% vs. a 2% decline for the S&P 500. At the same time, volatility in the markets is down about 1% today, but should end the week up 6%.
As gold futures rose about 2% on Thursday, JPMorgan analysts said in a report, "This may be delivering an exclamation mark to define the end of the 10-month, 25% fall in gold and 50% fall in gold equities."
In general, the Federal Reserve's quantitative easing program has a negative impact on the dollar, is viewed as inflationary and hence improves the outlook for gold, long seen as an inflation hedge.
For the past month, the SPDR Gold ETF has improved 5%. During the last four weeks, volatility has ticked up 2%, while the S&P 500 has been flat.
Gold futures prices have lost about 19% this year, but are set to finish the week with gain of roughly 4% this week, their largest weekly gain in five.
"China and India remain large physical buyers of the metal," the JPMorgan report noted. "We believe this highlights that enthusiasm for the metal remains strong amongst the majority of the world's population."
On Thursday, the World Gold Council said that recent falls in the gold price had led to "significant increases in demand, most notably from consumers in China and India" versus demand during the year-ago period.
