The Gold Economy

When your cab driver starts giving you tips, it’s a sure sign that a market has become overheated. Have gold ETFs reached that point?

Everybody knows that when the ordinary public get into a boom, the smart money gets out, says Brett Arends for The Wall Street Journal? To find out what’s going on in gold and who’s really doing the buying, Arends did a little digging:

• According to Financial Research Corp., a Boston firm, investors poured $7.4 billion into gold bullion ETFs through July. Most of the inflows went to SPDR Gold Shares (NYSEArca: GLD), but ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and iShares COMEX Gold (NYSEArca: IAU) also lured in a large amount of assets.
  
• Most of the money came from big institutions like pension funds, hedge funds and mutual funds. According to State Street, these account for at least 45% of the investment in GLD these days.
• Individual members of the public probably accounted for only about half the new investment, or $3.7 billion. The public has also been buying gold coins and bars, about 45 metric tons of gold bars and coins in the first half of this year – which is less than they bought last year.

Whether investors keep going for the gold is a question that seems to have divided the markets. According to Gold and Investment, BlackRock says even after gold has hit new highs last week, gold prices still have a way to go.

If you’re not convinced that gold has more power left behind it, consider several of the short ETFs and exchange traded notes (ETNs) that are available, including:

• ProShares UltraShort Gold (NYSEArca: GLL)
• PowerShares DB Gold Short ETN (NYSEArca: DGZ)

Tisha Guerrero contributed to this article.

Disclosure: None