Gold ETFs, including the SPDR Gold Shares (NYSEArca: GLD), the iShares Gold Trust (NYSEARCA: IAU) and the SPDR Gold MiniShares (NYSEArca: GLDM), have been the darlings among commodities funds this year and there’s reason to believe the yellow metal can continue shining.
Investors are embracing GLD, IAU and related ETFs as a quick and easy way to gain exposure to gold price movements as they hedge against market risks, help protect their purchasing power in times of inflationary pressures or capitalize on increasing demand from the emerging markets with a growing middle-income class.
“Having already rallied to the highest in more than six years, bullion will still benefit from safe-haven flows, according to Suki Cooper, precious metals analyst at Standard Chartered Bank, in an interview with Bloomberg. “Prices will average $1,510 an ounce in the fourth quarter of 2019 and $1,570 in the same period next year, she said.”
Investors have also been flocking to the SPDR Gold MiniShares (NYSEArca: GLDM). GLDM, the cost-effective alternative to GLD, recently surpassed $1 billion in assets under management after coming to market in June 2018.
Last month, GLD and IAU took in nearly $3 billion in a combined new asset as holdings across global gold ETFs hit record highs.
Gold ETFs are pushing to the upside amid increased expectations of a U.S. rate cut, even as some investors locked in profits from bullion’s recent rally. Gold is believed by many investors to be inversely correlated with interest rates. Rising interest rates make bonds and other fixed-income investments more attractive so that the money will flow into higher-yielding investments, such as bonds and money market funds, and out of gold, which offers no yield at all during times of higher interest rates, and back into gold ETFs.
“Bullion is up 16% this year as central banks lower borrowing costs and global growth drags amid the prolonged U.S.-China trade war, boosting demand for haven assets,” according to Bloomberg. “While some risk appetite returned to markets with the two countries agreeing on a partial trade accord last week, investors continue to add to exchange-traded funds backed by the metal, with holdings closing in on record levels previously seen in 2012.”
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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.