Bullion-backed ETFs, such as the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM), followed equities higher Wednesday, bolstering calls that the yellow metal is poised to take out old highs and perhaps rally to $2,000 per troy ounce as investors embrace safer assets.
With the Federal Reserve slashing interest rates to zero percent, cash might be king, but gold is certainly vying for that crown as a more suitable safe-haven asset. The effects of the coronavirus are no doubt weighing on the minds of investors. Likewise, the central bank responded in tow by bringing rates down to zilch and dumping an epic $700 billion worth into quantitative its easing program. Additionally, news that the European Central Banks (ECB) may take junk debt as collateral is seen as boosting bullion.
“A week ago, gold futures peaked at $1,788 an ounce, a seven-and-half year high as central banks around the world pumped trillions of stimulus dollars into the financial markets to prop up economies brought to a standstill by the COVID-19 pandemic,” reports Frik Els for Mining.com.
Gold ETFs Are Glittering
The 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.
Data confirm that investors are flocking to ETFs like GLD and GLDM as cost-effective avenues for bullion access.
“During the past year, gold ETFs added 659 tonnes, the highest on a rolling annual basis since the financial crisis, with assets under management (AUM) growing 57% over the same period,” according to Mining.com.
With the federal government stepping in to help shore up the economy, it might seem like gold gains could be tamped own. However, some market experts predict that the U.S. economy will be tested in the coming months, potentially further boosting bullion and ETFs like GLD and GLDM.
Year-to-date, investors have added $7.40 billion to GLD, a total surpassed by just five other ETFs.
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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.