Even against the backdrop of the strong U.S. dollar, gold and the related ETFs continue soaring. For example, the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM) are closing in on year-to-date gains of 6%.
The lustrous metal, which is a traditional safe-haven for investors, is benefiting from the current global uncertainty involving the coronavirus outbreak, which is significantly damaging global economic growth. April gold was recently up nearly $20 an ounce, reaching a high above $1,605. A subsequent flirtation with $1,700 per troy ounce has some banks boosting bullion price targets.
“CNBC reports US investment bank Citi believes the gold price will benefit from investors looking for yield and from buying related to the metal’s status as a haven in times of turmoil,” reports Frik Els for Mining.com.
Going For Gold Medals
Gold and ETFs such as GLD and GLDM have ample tailwinds in 2020 after ranking as one of last year’s best-performing commodities.
The ECB and the Bank of Japan have benchmark interest rates in negative territory. The “low real rates and a hesitant approach to normalizing policy at the Fed, the Bank of Japan and European Central Bank” have been driving the gold higher. Right now, real U.S. rates are negative as well, and the Fed is unlikely to make changes soon according to experts, which cuts the opportunity cost of holding bullion
Looking ahead, the World Gold Council argued that the precious metal could shine after the major monetary policy shift out of the Federal Reserve last year. Gold has historically performed in the 12 to 24 month period following policy shifts from tightening to “on-hold” or “easing”. Additionally, when real rates have been negative, gold’s average monthly returns have been double their long-term average.
“Gold should perform as a convex macro asset market hedge, resilient during ongoing risk market rallies but a better hedge during sell-offs and vol[atility]spikes,” according to Citi.
The bank believes the yellow metal can add another $100 an ounce over the next six months and sees bullion climbing to $2,000 an ounce over the next 12 to 24 months.
Year-to-date, investors have added a whopping $1.87 billion to GLD while the cost-effective GLDM has seen 2020 inflows of almost $127 million.
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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.