Have Faith in Yellow Metal: SPDR Gold Trust (ETF) (GLD), Market Vectors Junior Gold Miners ETF (GDXJ), Market Vectors Gold Miners ETF (GDX)

US Dollar Index

After Fed’s minutes of its last meeting, the US dollar rose against major currencies and the US dollar index reached a 5 month high. But the question is that is it sustainable? The answer might well be “no.” With Fed’s latest comments on the U.S. economy, the possibility of discontinuing the open-ended monetary easing looks a remote possibility. Thus, the US dollar index should go down after Fed’s next meeting, fueling the gold prices.

Conclusion

At the moment, the price of gold is hanging around $1580. As the U.S. economy still faces risk of another recession, the QE3 program doesn’t seem to be going away. But, after the recent minutes by Fed, it looks that the excessive asset buying program would be reduced. As of now, the US dollar index seems to remain strong while the gold prices are expected to remain low till Fed’s next minutes. Till then, the gold ETFs are expected to remain slightly low. After that, these ETFs would see a steady upside as the US dollar index is expected to keep low as a result of increase in the money supply. As money supply increases in the economy, people are expected to hedge themselves through gold. Therefore, I still remain bullish about gold in the long run. Plus, at such a low price, this is the best time to buy gold for long term gains.

The article Have Faith in Yellow Metal originally appeared on Fool.com and is written by Waqar Saif.

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