Gold exchange traded funds have been a bright spot in the markets this year as an extended low-rate environment, depreciating U.S. dollar and volatility pushed investors into the hard asset.
At the start of the year, gold enjoyed safe-haven demand as the equities market plunged into a correction.
Gold maintained its momentum as the Federal Reserve lowered its interest rate outlook to only two hikes this year from a previously expected four rate hikes. Additionally, with the dovish Fed stance, the U.S. dollar weakened, which made USD-denominated gold cheaper for foreign buyers and a better store of value for U.S. investors.
Looking ahead, the ongoing negative interest rate environment, with European and Japanese central banks cutting benchmark rates deeper into the red to promote growth, could push investors toward gold bullion as a more stable store of wealth. [Read More: Low-Rate Environment Will Help Support Gold ETFs]
“We believe that the prolonged presence of low (and now even negative) rates has fundamentally altered the way investors should think about risk and may result in a broader use of assets like gold to manage their portfolios more effectively and preserve their wealth over the long run,” the World Gold Council said in a research note.