The S&P 500 tumbled 5.67% in May, but safe-haven assets benefited. Just look at gold-backed exchange traded funds, such as the SPDR Gold Shares (NYSEArca: GLD) and SPDR Gold MiniShares (NYSEArca: GLDM).
GLD, the world’s largest gold ETF, surged 2.43% in May as bullion topped $1,300 per ounce late in the month. Against the current backdrop of the U.S. trade war with China, and the fear and uncertainty that accompany the rampant volatility and the worst May selloff for stocks in 50 years now, gold prices will continue to rise this year, according to one financial executive.
Boosting the case for gold is that the Federal Reserve recently alluded to no more rate hikes for the rest of 2019 after initially forecasting two. The capital markets initially expected rates to remain steady after the central bank spoke in more dovish tones following the fourth and final rate hike for 2018 last December.
“Gold jumped out of the gate on Friday, rising more than 1% in heavy volumes as investors seek a safe haven amid a widening trade war unleashed by US President Donald Trump,” reports Frik Els for Mining.com. “Gold for delivery in August, the most active futures contract, reached a high of $1,311.80 an ounce, the highest in seven weeks with 29m ounces changing hands in New York by lunchtime.”
A Strong Case For Gold
Investors have looked to GLD 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.
To its credit, dollar-denominated gold jumped in May even as the greenback rallied. The Invesco DB US Dollar Bullish (NYSEArca: UUP) added almost half a percent last month.
“Gold is seen as a store of value in turbulent times and the price of the metal usually moves in the opposite direction of the US currency. Gold is also finding favour as bond yields in the US fall and a rate cut in the world’s largest economy moves from possibility to probability,” according to Mining.com.
In the second half of May, investors added nearly $315 million to GLD.
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