Is This The Safest Gold ETF For 2015?

Gold had one of its worst nightmares in the last two years as investors shifted to more risky asset classes like equities. This is especially true in the backdrop of the strengthening dollar and continued bullishness in the stock market, two conditions that spoilt the safe haven appeal of the yellow metal. The bleeding stretch led the metal to languish below the $1,200 an ounce level – almost near its lowest level since April 2010 (read: 4 Ways to Short Gold with ETFs).

The start to 2015 was no different from the last two years as rising rate worries intensified at the beginning of the year. But the metal started to buck the trend since April. Weakness in the greenback in the wake of soft U.S. GDP in Q1 was the major driving force behind this uptrend.

Notably, PowerShares DB US Dollar Bullish ETF (UUP) tracking the greenback lost over 5% in the last one month (as of May 14, 2015) (read: ETFs in Focus Post Fed Meet).
If this was not enough, the recent sell-off in treasuries and stocks, following the Fed’s indication that U.S. equities are still modestly overvalued and long-term bond yields might see a surge once the Fed hikes key rates in the U.S., baffled investors. Many of the confused investors finally flocked to gold to seek a safe haven bid.

As a result, most long gold exchange-traded products were in green in recent trading sessions. The biggest gold ETF, SPDR Gold Shares (GLD), added over 2.2% in the last five days and 1.8% in the last one month (as of May 14, 2015).

How Long the Rally Will Continue? 

Greenback may be losing now, but there is a high chance that the losing streak will be broken sooner or later this year. The U.S. economy has come up with a sturdy job report in April and mixed retail sales numbers. The inflation picture is also brightening slowly (read: Will Gold ETFs Continue to Shine?).

The rate hike is long due in the U.S. and if the economy keeps posting somewhat sound economic data going forward, we might see the Fed leaving the low-rate environment in the final quarter of the year. This in turn will fuel the greenback once more and broad-based commodities will nosedive.

What Are the Best Gold ETF Bets if Dollar Rises?

Investors should note that while the rising rate prospect is the most discussed topic this year in the U.S., most developed nations across the globe are mulling over policy easing. Japan extended its already gigantic stimulus measure in October 2014 and the ECB rolled out the QE measure in the Euro zone.

In most cases, gold investments are made via the U.S. dollar (which is presently at a roller coaster ride). So, it would be wise to look at the gold ETFs which are not linked to the greenback. Two such lucrative options are Gartman Gold/Yen ETF (GYEN) and Gartman Gold/Euro ETF(GEUR). While GYEN provides positive returns by using the yen for investing its assets in the gold market, GEUR does so with the euro.

Both gold products rocked at the start of 2015 with GEUR returning over 10% in the first quarter buoyed by the ECB’s QE launch and the resultant weakness in the euro. Though GEUR lost some strength in the last one month (down over 5%) on the strengthening of euro following a revival in the Euro zone, the trend should not hold for long (read: Is The Worst Over For Euro ETFs?).

After all, the Euro zone will be under the coverage of easy money polices till September 2016. Moreover, any disruption in the Greek debt-deal saga will weaken the common currency. Still, edgy investors may choose to stay out of GEUR for the time being.

Is GYEN the Best Option? 

After a nice show in 2013, the Japanese economy has been struggling since the second half of 2014. Japan’s growth in Q1 of 2015 has also been restrained by soft consumption. This ensures that the life of Japanese stimulus will be long as the economy is yet to stand on its own feet.

The greenback also hardly weakened (down 0.8%) against the Japanese yen in the last one month (as of May 13, 2015). GYEN advanced 1.5% in the year-to-date frame, 1.9% in the last one week and 0.8% in the last one month and could be in watch if the greenback again start rising.