streetTRACKS Gold Trust (ETF) (GLD)

NetscribeETF (94.05) Submitted: 2/07/07 7:53 AM : Start Price: $64.78 GLD Score: 36.18

History has carved out several instances whereby financial advancement has led to the fundamental revaluation of an asset class. Taking a cue from the same, with the launch of streetTRACKS Gold Shares (GLD), inclusion of gold in an asset allocation model for diversification purposes has become relevant for many investors.

GLD fund issues shares equal to roughly one-tenth of an ounce of gold, at current market prices and seeks to offer direct exposure to gold price fluctuations in a more liquid and convenient format. One of the fastest growing US-listed ETFs in history, the fund has grown to over $10 billion in assets and is now the ninth largest ETF in the U.S.

Softness in manufacturing sector combined with worries about terrorism and North Korea's atomic program has worked against the dollar. On the back of same, gold prices are on an upsurge and have able to garner the focus of various hedge funds. Due to the direct correlation with the crude oil and inverse correlation with dollar prices, investors who use the commodity as an inflation hedging technique and diversifying their portfolio, are moving towards gold funds.

Going ahead, the gold prices envisage a positive environment, with supply of gold is coming under pressure due to lack of any big finding in the past years. On the flip side, the demand is ever increasing, thanks to the increasing demand from the largest consumer India. Further, many central banks across the globe have decided to increase their gold reserves which should further augment the prices in coming years.

Though the fund has posted some hefty returns since inception, with one-year returns for 2006 being 13.94%, it cannot be considered as a tame investment in the eye of a volatile scenario and the wild fluctuation of gold prices. Turning to the investors’ perspective, for a short-run atleast, gold prices are well paced on the charts for a strong move up.

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