ETF Trends
ETF Trends

As volatility ramps up, market swings may jerk around a traditional portfolio of stocks and bonds. Instead, investors may help smooth out the ride with a gold exchange traded fund.

While gold may look expensive, Deutsche Bank argues that the hard asset serves as insurance against rising economic risks and market turmoil, reports Leslie Shaffer for CNBC.

“There are rising stresses in the global financial system; in particular the rising risk of a U.S. corporate default cycle and the risk of a sharp one-off renminbi devaluation due to the sharp increase in China’s capital outflows,” Deutsche Bank said in a note.”Buying some gold as ‘insurance’ is warranted.”

Gold prices strengthened this year as market volatility triggered safe-haven demand. Nevertheless, more long-term investors who are seeking insurance through a gold play should not throw everything into the precious metal. A portfolio allocation of about 5% is adequate for a partial hedge against any more trouble ahead.

Investors can turn to a number of physically backed gold ETFs that track the price movement of gold to hedge against market risks, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL). Year-to-date, the gold-related ETFs have all increased over 16.0% as Comex gold futures bounced back to $1,223.9 per ounce.

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