Gold (IAU) : Bullish but within a large trading range

iShares Gold Trust - IAU - 12/02/19

Short Term strategy: Positive (90%) / trend +
Long Term strategy: Positive (100%) / trend +

Characteristics of the ETF

The ETF IAU Gold Trust (Ishares) allows the investor to access a daily exposure to gold bullion price variation, and is an easy way to access physical gold through a financial instrument, both liquid and whose access cost is limited to 0.25%. Gold is a very volatile asset, and as any commodity does not give rise to a dividend and is a risky asset. AUM amount to approximately $ 12438million.

Alternative ETFs: GLD (SPDR in USD), DGL (PowerShares in USD)

Index & components

Gold has the particularity of not being correlated with equity and bond markets and has also been used as a safe haven since immemorial time, especially in periods of high inflation and financial crises, as we saw during the recent period (2007-2012) marked by the subprime crisis, then by the crisis on European peripheral debts.

In addition, gold is sensitive to other factors such as central bank purchases and currently there are significant flows of purchases from central banks of emerging countries such as China and India. The dynamics of US interest rates are also very important for gold prices as this precious metal naturally do not deliver dividends or coupon, so the Fed policy is a central issue for gold prices and if the Fed pause or soften the rate of hike in the coming months it should be beneficial for gold prices. On the other hand, in the event of an inflationary spiral as in the 1970s, the very sharp rise in interest rates becomes good news for gold as a safe haven.

Gold can also be seen as a diversification alongside an equity portfolio, as the evolution of the precious metal is not correlated with economic cycles and can follow a very different evolution or opposite to the trend of stock indices, but not necessarily.

Finaly Gold is denominated in US $, which can have a double effect since on the one hand the dollar is itself considered as a safe haven and the decline of the dollar tends to be favorable to commodities.

Rumors of embargoes / quotas on the import of gold in India following a demonetization policy also weighed on the prices from the end of 2016, while India is the largest consumer of gold especially for jewelery. But the FED's currently measured policy on rates and the still significant threats to possible trade conflicts between China and the US (or even with Germany and Japan), coupled with possible underestimated consequences of Brexit as well as the very large indebtedness of the largest economies (US, China, Japan, Europe) may favor a rebound of the yellow metal later on.

Latest developments

Gold fell by 1.8% in 2018 after an increase of 13.1% in 2017 and +8.6% in 2016, following a 3-year sharp decline between 2013 and 2015, which corresponded to the end of the European debt crisis.

Gold rose again in 2019 (+ 2.7%), thanks to the Fed which took note of the risks weighing on the world economy and on the US, suspending its rate hike.

US 10-year yields fell back to around 2.6% while inflation expectations are revised downward. All of this is good for gold that is not attractive and is getting stronger when the dollar goes down as international politics becomes less and less readable and risks of all kinds pile up over the world economy.

Monthly data

Gold has recovered well since last September and has reversed the downward trend that was gradually established in 2018 and was linked to fears of inflation. However gold remains within a large trading range between 1100 and 1400$ which implies that the movements within these limits should not be considered as trends. In the event of an upward break of $ 1,400, gold would enter a strong positive configuration with the 2011 peaks ($ 1,920) in sight. But everything remains to be done.

Weekly data

The weekly chart shows a medium-term reversal confirmed by the crossing of the EMAs13 and 26,  and EMAS100 and 200 as well as the passage of the zero line by the MACD. The trend has been fairly neutral for 3 years  even if pull-backs are  less and less powerfull and the release of this range passes through the high resistance of $ 1370. A new attack of this ceiling is being prepared, but the outcome remains uncertain. A confirmed crossing of $ 1,370 would open a very significant potential and a probable acceleration of prices.

ETF Objective

IAU is an ETF listed in USD, which seeks to replicate prices of Gold


Inception date 21/01/2005
Expense ratio 0,25%
Issuer iShares
Benchmark LBMA Gold Price
code/ticker IAU
ISIN US4682851053
Currency USD ($)
Exchange NYSE
Assets Under Management  12 438 M$
Dividend No
Number of holdings 0
Risk 3/5

Country Breakdown

Non significant

Sector Breakdown

Gold  100%

Top Ten Holdings

Gold  100%