Already among the stars of the commodities space this year, gold ETFs such as the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM) are rewarding investors and could be poised to do more of the same as 2020 moves along.
Equities haven’t been the only beneficiaries of the federal government pumping stimulus dollars into the economy. As Treasury yields continue to fall and possibly hit negative territory based on the Federal Reserve’s next interest rate moves, this could keep gold prices rising.
“Gold prices could reach a record by the end of the year. But don’t expect to see a smooth ride to the top, even as measures to offset the pandemic-hit economy support the precious metal’s appeal as a haven,” reports Myra Saefong for Barron’s.
All That Glitters…
We are currently seeing greater demand for gold exposure through ETFs as an easy way to hedge against ongoing risks and as a way to protect purchasing power in light of aggressive monetary easing policies like near-zero interest rates and infinite bond purchasing.
Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
“The yellow metal spent some time trading lower for the year as investors sold gold in a bid for cash to cover losses in the stock market. U.S. benchmark stock indexes have recovered a bit in the second quarter,” according to Barron’s.
Gold bullion has been a traditional safe-guard of wealth and purchasing power in times of high inflation, and the loose monetary policies should devalue the currency. Lower interest rates are helping gold’s cause, too. Depressed interest rates diminish the opportunity cost of holding non-yield-generating assets, like gold.
The World Gold Council (WGC) highlighted gold-backed ETFs that attracted inflows of over 298 tons of the precious metal in the first three months of the year, which sent global holdings in these physically-backed products to a record high of 3,185 tons. The WGC also added that ETF inflows for the first quarter surged more than 300% year-over-year.
Darwei Kung, portfolio manager and head of commodities at asset management firm DWS Group, thinks gold can hit $1,800 per troy ounce by March 2019 and flirt with $1,900 per ounce after that.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.