The expectation that the U.S. Federal Reserve will turn dovish with regard to interest rate policy is causing investors to pile into more gold. The precious metal is leading the way for commodities exposure, particularly for the Neuberger Berman Commodity Strategy ETF (NBCM).
The Fed could finally be taking a pivot on its hawkishness after seeing the latest job market data. While the unemployment rate dropped to 3.5%, the 236,000 jobs added during the month of March fell below expectations.
A potential economic slowdown is spurring a flight to safe havens like gold. Of course, that bodes well for bullish investors in the precious metal, which could be en route to new highs.
“Spot gold has closed above the US$2,000/oz mark this week for the first time since March 2022 after US data showed the job market is loosening, fuelling expectations that the Fed is nearing the end of its monetary tightening cycle,” an ING market report noted.
Gold is already up about 10% for the year. It’s up 11% within the past month, and stretching out the time frame to six months shows an increase of 20%.
“Gold has also benefitted over the last month from increased safe-haven demand given concerns from the banking sector,” the report added. “Markets will be keeping a close eye on the US jobs report later this week and whether this takes the gold market to striking distance of its all-time high of US$2,075.47/oz made in August 2020.”
Active and Diversified Commodities Exposure in 1 ETF
As of April 5, gold constitutes about 14% of NBCM, which offers investors an actively managed fund. With its active management style, NBCM puts the portfolio holdings in the hands of seasoned portfolio managers, which will allow for changes to holdings when market conditions warrant necessary adjustments. This adds a layer of flexibility to an investor’s portfolio, especially with the capital markets responding to the U.S. Federal Reserve and interest rate policy.
The fund invests in commodity-linked derivatives with an active risk-balanced, diversified approach that seeks to minimize the effects of market volatility — something privy to the commodities market. Tactical exposure adjustments expand potential alpha sources by considering top-down macro variables among commodity sectors and individual commodity outlooks to take advantage of short- and long-term opportunities.
NBCM comes with a 0.65% net expense ratio (0.79% gross), and the fund currently has 28 commodity holdings for diversified exposure. As mentioned, gold is the top holding, with corn and Brent crude rounding out the top three.
For more news, information, and analysis, visit the Commodities Channel.