Another round of global uncertainty is bolstering the gold trade, with the precious metals miners and sector-related exchange traded funds shining in the equities space.
On Wednesday, the Sprott Gold Miners ETF (NYSEArca: SGDM) rose 2.9%, iShares MSCI Global Gold Miners ETF (NYSEArca: RING) gained 2.5% and Market Vectors Gold Miners ETF (NYSEArca: GDX) increased 2.1%.
Meanwhile, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) were up about 1.4% Wednesday as Comex gold futures advanced 1.3% to $1,092.9 per ounce.
Gold bullion was trading around a two-month high Wednesday after geopolitical tensions in the Middle East and North Korea’s claim of a successful hydrogen bomb test triggered risk-off sentiment and fueled safe-haven trades.
In the Middle East, tensions are rising after Saudi Arabia executed a prominent Shi’ite cleric Saturday, which caused widespread unrest in Shi’ite Muslim countries and forced Saudi Arabia to cut ties with Iran after Iranian protesters rushed the embassy in Tehran. [Geopolitical Risks Renew Gold ETF Trade]
Global stocks, notably Asian markets, also reeled in response to North Korea’s claimed hydrogen bomb tests.
“We are just three days into the year and already global event risk is dominating the financial market landscape everywhere,” David Rosenberg, chief economist and strategist at Gluskin Sheff, said in a research note, according to USA Today.
Meanwhile, UBS analysts argue that 2016 could be the year that gold and gold miners turnaround, reports Julie Verhage for Bloomberg.
“Gold has been trading in a cyclical bear market since 2011,” UBS analysts Michael Riesner and Marc Müller said in a note. “In 2016, we expect gold and gold mines moving into an eight-year cycle bottom as the basis for the next multi-year bull market. Initially, we see gold profiting as a safe haven and as of 2017, gold could profit from the U.S. dollar moving in a major top and starting a bear market.”
Sprott Gold Miners ETF
Max Chen contributed to this article.