Picking a Gold ETF: ETF Momentum Tracker Announces Their Choice

July 30, 2008 - PRLog -- Don Dion, publisher of Fidelity Independent Adviser’s ETF Momentum Tracker, announced today that despite recent setbacks, iShares COMEX Gold (IAU) has risen more than 8% since he added it to the ETF Momentum Tracker portfolio in January.

The latest edition of ETF Momentum Tracker, released today, offers an in depth look at gold prices, and how iShares’ IAU has responded to the spike. “Even though the price of gold fell last week” Dion said, “it’s been locked in the range of $850 to $990 since the July 15 spike—still historically high by almost any standard.”

The price of an ounce of gold fell by $31 last week, yet it was still up more than 11% for the year by Friday. The price of the metal, which peaked in March at $1,033 per ounce after the announcement of the Bear Stearns bailout, closed on July 25 down about 10% from the record and off 6% since July 15.
   
“Gold prices are still very strong,” Dion said, “but this shouldn’t come as a surprise.” Dion cited ongoing volatility in stock market, increasing concerns about inflation, elevated and erratic oil prices, and geopolitical turmoil in the Middle East as reasons that investors continue to flock to “safe-haven, inflation-hedging gold.”

When it came to selecting a gold ETF for his ETF Momentum Tracker Portfolio, Dion turned to iShares COMEX Gold (IAU), which invests directly in gold bullion rather than in stocks of gold mining firms or other gold-related equities. The fund buys bullion and, according to iShares, holds it in a trust, backed by actual gold bars held by the Bank of Nova Scotia. IAU hit an all-time high on March 14, which put IAU’s gain since-inception (Feb. 4, 2005) at 132.3%. It remains up 114.8% and, despite a one-week loss of 4.8%, up 37% over the last 12 months and 11.2% year to date.

“This fund is a good pure-play on gold,” Dion said, “because the fund’s NAV directly reflects gold prices set by the closing price of COMEX spot gold. Each share represents one-tenth of an ounce of gold, less IAU’s 0.4% expense ratio.”

What signals has Dion come to rely on for gold trends? In IAU’s profile, Dion observed that, “gold prices tend to rise with oil, because high oil prices signal inflation and threaten economic growth in general.” Dion also noted that “a weak dollar emboldens investors to bid up gold prices, because gold becomes A) cheaper to buy with other currencies, and B) an alternative currency with a reputation for holding its value.”

While IAU has helped to buoy ETF Momentum Tracker’s Portfolio in difficult markets, Dion is quick to note that an investment in IAU is not without risk. “By bypassing gold mining and other stocks, IAU avoids the risks of gold production, particular firms and industry pressures,” Dion said, “but it also invites uncertainty.”
   
“As with any other commodity, the next direction for gold prices is highly uncertain,” Dion cautioned. “Analysts are all over the map,” Dion added, “but know this: If prices remain high, IAU will likely benefit. But a drop could be painful.”

ETF Momentum Tracker is published weekly by Fidelity Independent Adviser, and provides subscribers with a strategy for ETF investing that utilizes relative strength indicators. For more information on the ETF Momentum Tracker Portfolio or profiles, visit http://www.fidelityadviser.com/readMe_ETF.asp .


Fidelity Independent Adviser has more than 70,000 subscribers in the United States and 29 other countries, and publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers. http://www.fidelityadviser.com/

Publisher Don Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $700 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

For more information, or a Free Portfolio Review, go to http://www.dionmm.com/ or call toll free: 1-(800) 432-7447

# # #

Fidelity Independent Adviser's newsletters offer a broad range of investors Don’s commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds