Gold ETFs Still Relevant as a Risk Hedge

While gold and related exchange traded funds may have lost some of their luster in recent months, the precious metal may still serve as a suitable hedge against potential unknowns ahead.

“Gold may remain flat for 2018, but remains an attractive tool to hedge against potential market volatility and geopolitical risks,” Maxwell Gold, director of investment strategy at ETF Securities, said in a research note, estimating a base case of $1,250  to $1,300 per ounce.

Comex gold futures are currently hovering around $1,270.3 per ounce.

The world economy continues to expand as central bankers maintain massive stimulus programs. However, there are signs that developed markets are close to their cycle highs and are heading toward a period of slower growth ahead.

“While we think that the world economy will escape a significant upset in 2018, there remain formidable tail risks,” Gold said.

Specifically, Gold pointed to significant risks associated with stretched valuations in both equity and bond markets, along with potential negative consequences of an unwinding monetary policy. The strategist argued that this could lead to renewed appetite for alternative assets, such as commodities real assets and precious metals.