The Gold ETF, GLD, is down 22% on the year vs. the S&P 500 Total Return Index 21%.  At GLD’s low on June 28th, it was down almost 30%.  For the first time in which seems like forever for gold investors, gold bounced higher with risk assets the past six weeks. It may be just a technical bounce off oversold levels or may have more to do with fundamentals, inflation and other a host of other factors.

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“Gold in an unusual asset,” Fed Chairman Bernanke remarked recently (July 18) at a Senate Banking Committee hearing. “ People hold it as a sort of disaster insurance. Falling prices may reflect greater confidence in the economy and less concerns Fed programs will cause inflation spike.”

Asset prices (real estate, stocks and now even gold) are getting a boost from quantitative easing programs worldwide.  Gold’s nearly 40% fall from September 2011 highs was largely an unwinding of a very over-crowded speculative trade.  The recent action makes us more constructive on gold than we have been in a long time.  A break above the 50-day moving average will signal GLD is “out of the woodshed.”

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