In an economic slowdown and a time of uncertainty, gold and its exchange traded funds (ETFs) offer an attractive alternative to investors. Let’s take a look at six factors that could push the metal’s price even higher.
What’s driving gold prices today isn’t necessarily what drove them 40 or 100 years ago.
- Today, wealth preservation is the key driver for gold investment. Investors want to protect their assets, and gold holds its value, reports Eric Lam for the National Post.
- For most of the last decade, gold has performed well between September and December. Some investors may be considering these seasonal factors.
- The International Monetary Fund (IMF) sold 403 tonnes in September, and rumor has it that China is interested in it.
- India is also stepping up its gold holdings to 558 tonnes, up from 358 tonnes, as it seeks to diversify away from the U.S. dollar.
- In an attempt to revitalize the U.S. economy, the federal government has turned to printing massive amounts of money. The dollar has lost ground against its counterpart currencies, which has led many to believe that inflation is on the horizon. As we all know, a good hedge against inflation is gold. (Other ways to hedge against inflation).
- Supply is becoming constrained. Of the world’s three biggest gold producers (China, Australia and South Africa), only China has increased production.
What’s the appeal of gold for the average investor? Lakshmi Iyer of Kotak Mahindra Mutual Funds states:
- Gold offers diversity, liquidity, safety and security to investors.
- Gold reduces the risk of losing money in the event that a preferred asset underperforms or when a specific sector is not doing well. (How to utilize precious metals).
For more stories on gold, visit our gold category.
Gaining access to gold is easy through the use of the following ETFs:
- SPDR Gold Trust (NYSEArca: GLD): up 20.2% year-to-date
- iShares COMEX Gold Trust (NYSEArca: IAU): up 20% year-to-date
- PowerShares DB Gold Fund (NYSEArca: DGL): up 18.4% year-to-date
- ETFS Physical Swiss Gold Shares (NYSEArca: SGOL): up 7.1% since its inception
For full disclosure, Tom Lydon’s clients own shares of GLD.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.