The SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM) are each up more than 1% this week and are closing in on year-to-date gains of 8%. Add to that, bullion recently hit a seven-year high.
None of those factors mean the yellow metal is done soaring. Actually, history says gold can keep trading higher following its recent upside.
“Prices have surged this year as haven-seeking investors pour in. Markets have been shaken by worries that the coronavirus outbreak will cripple global growth, coupled with expectations for looser monetary policy around the world,” reports Bloomberg. “Assets in bullion-backed exchange-traded funds are at the highest ever and money managers are holding a near-record bullish bet.”
As the coronavirus outbreak continues to be the wild card in the markets, the safe haven of precious metals is in high demand, especially for exchange-traded funds (ETFs) that are backed by gold. ETFs have been stockpiling gold as more coronavirus news continues to invade the financial markets.
Going With Gold
“Yet gold remains a relatively small percentage of portfolios by historic standards. And as investors assess the virus threat to the world’s biggest economies, it’s worth remembering that the metal’s haven qualities are especially evident during recessionary periods,” according to Bloomberg.
Market participants turned to gold toward the end of 2019 as a potential hedge against economic and political uncertainty, especially after U.S. equities rallied toward record highs. The most recent rally may be attributed to rising tensions between Tehran and Washington after President Trump reiterated threats to strike Iran if things escalate between the two countries and as markets waited on the inevitable retaliation to the death of Major General Qassem Soleimani.
Now, the novel coronavirus, which is sapping global economies and shaving trillions off global equity market value, is sending investors to bullion and ETFs like GLD and GLDM.
“After an unprecedented 25 straight days of inflows, the total value of gold held by exchange-traded funds tracked by Bloomberg is closing in on the record of over $144 billion reached in 2012. But while bullion holdings have jumped this year, they’re still relatively low as a proportion of total ETF assets,” reports Bloomberg.
Year-to-date, GLD and GLDM have seen inflows of $2.17 billion and $170.77 million, respectively.
For more on alternative strategies, please visit our Alternatives Channel.
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.