As gold prices strengthen and the metal has its best year in seven, now might be the time to add to or initiate gold exposure. Gold has risen as the economic impact of the global pandemic takes its toll, and the yellow metal is often viewed as a store of value. The post-pandemic world is unknown, and it’s important to prepare portfolios.
In the upcoming webcast, Prepare for the Post-Pandemic World with Gold, Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors, will argue that now is the time to explore gold and gold mining equities, which benefit from higher metal prices, and historically move in the opposite direction of broader equity markets.
“I’m maintaining my $4,000-an-ounce call on gold by the end of this particular cycle,” Holmes said in a recent note. “Some may believe this to be unrealistic, while others are beginning to adjust their own projections as global central banks and finance ministers continue to flood their economies with easy money. Last Tuesday, the amount of negative-yielding government debt around the world crossed back above $16 trillion for the first time since September 2019.”
As a way to gain exposure to the potential rise of gold, investors may focus on a fund strategy that incorporates royalty and streaming companies, which many consider being the “smart money” of the space, such as the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU). The U.S. Global GO GOLD and Precious Metal Miners ETF is a smart beta offering that tracks a specialized or rules-based index to help hone in on quality players in the gold mining space. The underlying U.S. Global GO GOLD and Precious Metal Miners Index uses quantitative analysis designed to capture the performance of companies engaged in the production of precious metals either through active (mining or manufacturing) or passive (owning royalties or production streams) means.
The ETF also includes a 30% tilt to royalty and streaming companies, which could help investors better manage common risks associated with traditional producers, such as building and maintaining mines, among others. The lower risk may also diminish risk since royalty companies have historically rewarded investors by increasing dividends at a faster pace than the broader equity market.
According to U.S. Global, royalty companies are a superior way to target the gold mining segment. Royalty companies are not responsible for costly infrastructure, so huge operating expenses can be avoided. These companies hold highly diversified portfolios of mines and other assets to mitigate concentration. Additionally, they generate some of the highest revenue per employee of all public companies while growing cash flows and dividends.
Financial advisors who are interested in learning more about gold can register for the Tuesday, August 10, webcast here.