The party isn’t over for gold and the related exchange traded funds, including the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM). In fact, it may just be getting started.
A recent rally by the U.S. dollar is weighing on gold prices, but that could be the pullback some investors are waiting for to get involved with the likes of GLD and GLDM.
Even with the recent sell-offs as of late, it’s good to be gold right now. With more market uncertainty ahead, the precious metal is still topping the list when it comes to exchange-traded fund (ETF) choices, and investors who want gold exposure can look to ETFs to fill that need. Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
“Gold could hit a record before the year-end, aided in part by the risks surrounding the U.S. presidential election, according to Citigroup Inc.,” reports Bloomberg. “Uncertainty over the contest and delays about the outcome may “be under-appreciated by precious metals markets,” analysts including Aakash Doshi said in a quarterly commodities outlook. The bank’s forecast implies a surge of more than $200 for bullion futures from current levels.”
Catalysts for GLD, GLDM
Gold has been a popular play for investors to hedge against ongoing volatility, uncertainty, and inflationary risks. The coronavirus pandemic has ravaged economies and fueled heightened uncertainty, which has in turn helped support gold as a safe-haven bet. Meanwhile, the copious amounts of fiscal and monetary stimulus measures have inundated the markets with cash, fueling demand for physical assets like the hold that can help investors maintain their purchasing power.
“Gold rallied to an all-time high last month as investors sought havens amid the coronavirus pandemic, but prices have slipped back since then,” according to Bloomberg. “Citi’s outlook reflects rising investor concern about the battle for the White House that pits incumbent Donald Trump against challenger Joe Biden. The already complex race has acquired added tension with Trump’s plan to speedily replace the late Justice Ruth Bader Ginsburg on the U.S. Supreme Court.”
The upcoming presidential election and ensuing uncertainty surrounding that event could boost the allure of gold ETFs such as GLD and GLDM.
The election “could be an extraordinary catalyst for gold flat price and volatility skew late in the fourth quarter, even though historically there is no clear pattern for gold trading or price volatility into and after U.S. elections,” Citi said,. “That is one reason why we expect gold prices to hit fresh records before year-end.”
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