05/23/13 05:03:07 PM FUND STRATEGIES

WHAT''S AHEAD FOR GOLD ETFS

After experiencing several years of inflows, exchange-traded funds (ETFs) that own gold have witnessed outflows this year. However, Todd Rosenbluth, senior director of ETF research for S&P Capital IQ, thinks removing an allocation to gold from a diversified investment portfolio might be shortsighted.

He points out, for example, the beta for SPDR Gold Shares ETF (GLD 133 NR) is 0.17 (over three years versus the S&P 500), thus suggesting very low correlation with U.S. large-cap stocks.

"Gold is a way to hedge your portfolio against inflation, and a way to add some diversification to your portfolio so you're not only in equities or fixed income," comments Rosenbluth, who notes past performance is no guarantee of future results.

In 2012, the gold price increased 7% to end the year at $1,675 per ounce. So far in 2013, gold prices have moved in the opposite direction, and gold recently traded for $1,374 per ounce with much of the year to date decline occurring in April amid signs the U.S. economy was improving and concerns that the Federal Reserve might slow down its bond buying program

In the first four months of 2013, investors pulled $14.8 billion out of gold based exchange traded products, with more than half that amount occurring in April alone. Most of the outflows were from GLD ($13.3 billion), the largest and oldest of the products that still has over $45 billion in assets. However investors also pulled out of other smaller ETFs from iShares and PowerShares.

"Consensus estimates gathered by Capital IQ suggest gold is going to move higher as we progress throughout 2013," says Rosenbluth. "So while we've seen a pullback and we've seen analysts bring in their estimates, the outlook is still for gold to move higher between now and the end of the year."

Indeed, Johnson Imode, the S&P Capital IQ metals and mining equity analyst, forecasts gold prices will average $1,495 per ounce in 2013 - higher than current levels.

"Gold prices have come down, due to increasing U.S. economic confidence, lowering gold's role as a safe haven, and concerns about potential gold sales in Europe to help lower government debts," says Imode. "We do still expect gold prices to remain historically high though, as recent IMF global growth cuts show that economic uncertainty remains."

If you're interested in gold or using a gold ETF, there are newly-launched reports on gold ETFs on MarketScope Advisor, including reports on GLD, iShares Gold Trust (IAU 13 NR), Physical Swiss Gold Shares ETF (SGOL 136 NR), and PowerShares DB Gold ETF (DGL 47 NR). Each report contains valuable information like price, past performance, average daily volume, and shows the trajectory of assets under management. The report also includes detailed data on each ETF's cost structure, including expense ratio, bid/ask spread, and price-to-NAV five-day moving average, and how consensus forecasts for gold compare to other commodities you might be considering such as silver or platinum. Click on the ETFs tab in MarketScope Advisor to see reports on 40 commodity ETFs in addition to S&P Capital IQ rankings on 820 equity and fixed income ETFs.