Gold, like other commodities, is often denominated in U.S. dollars. This means investors buying ETFs such as the SPDR Gold MiniShares (NYSEArca: GLDM) and SPDR Gold Shares (NYSEArca: GLD) typically want the greenback to weaken. However, bullion’s performance against another dollar, the Canadian variety, could prove instructive.
Gold has long been used as a safe haven asset, particularly when the value of the dollar declines or investors fear market volatility and uncertainty, like in the case of a tariff war. Furthermore, it provides a hedge for inflation since its price typically rises in conjunction with consumer prices.
“In the last month, gold has seen its second-best performance against the Canadian dollar, with prices up more than 7%; Gold is seeing its best performance against the British pound, up more than 10% in the last 30 days. By comparison, spot gold is up 6% against the U.S. dollar in the last month,” reports Kitco News.
The case for gold was undoubtedly assisted by the Federal Reserve who implemented a rate cut of 25 basis points recently. The weakness in the U.S. dollar caused gold to climb, but the case for the precious metal is also coming from the bond markets.
Gold For Friends In The North
“Philippe Cloutier, president, and CEO of Cartier Resources said that in the current price environment now is an exciting time to be a junior explorer,” according to Kitco. “He explained that the mining sector continues to face the growing problem of falling production. He added that it’s only a matter of time before major producers look to Canada’s north to fill a growing void.”
Gold’s recent run is also boosting miners ETFs, including the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU). GOAU is higher by nearly 44% year-to-date.
GOAU a smart beta offering that tracks a specialized or rules-based index to help hone in on quality players in the gold mining space. The underlying U.S. Global GO GOLD and Precious Metal Miners Index uses quantitative analysis to pick stocks, with a particular focus on royalty companies.
According to Kitco: “Frank Holmes, CEO and chief investment officer of U.S. Global Investors said in a telephone interview with Kitco News, said that the record-high gold price makes Canadian projects a lot more interesting; however, he added that it’s the producers that will benefit from the record prices more than the junior sector.”
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