ETF Fever

This weekend's WSJ featured an article on how ETFs investing in gold have increased demand for the metal.  According to the article, streetTracks Gold Shares ETF (GLD) now holds more gold than the People's Bank of China and the European Central Bank.  In fact, there are only seven countries which currently hold more gold than the Gold ETF, and they are the US, Germany, France, Italy, Switzerland, Japan and the Netherlands.  At the same time, demand from traditional sources has declined.  For example, since 2001, worldwide demand for gold to make jewelry has fallen by 13% (so much for the booming new demand from India and China).

The question for investors boils down to whether or not commodities like gold are rising because of increased real demand or the proliferation of ETFs that make commodity investing easier for investors.  Looking at a chart of gold (the commodity) shows that while it certainly bottomed before a gold ETF was formed, the bulk of the rally came after its formation.

Whatever your opinion, there's no denying that demand, no matter where it comes from, will cause prices to increase.  So while the current source of demand that is fueling gold may not be as healthy as demand from industrial and manufacturing processes, as long as it remains in place, prices should remain high.  It's when this demand dries up that gold investors should be worried. 

With hundreds of ETFs available, unlike ever before, individual investors are able to trade a multitude of different strategies (like buying gold or oil) with the click of a mouse.  However, just trying to gain a handle on the various ETFs out there can end up being a full time job.  In order to make finding what you are looking for a little easier, we offer several products that help speed up the process.  First, our ETF cheat-sheets offer a family tree of US and International ETFs. 

For investors looking for ETF analysis, our ETF Trends Report, which is included in the Bespoke Premium service, provides traders and investors with a unique tool to quickly identify how different areas of the market currently look using a proprietary trend and timing score.  Each day, we cover a different set of ETFs that track indices, sectors, groups, styles, commodities, fixed income, currencies, etc.  Long term investors can use this tool to determine when to add or subtract from a position, while active traders can use it to identify trade ideas.

And for investors that want to take a hands-off approach to ETF investing, Bespoke provides an all-ETF portfolio management strategy as well.