Consequently, gold prices have been rebounding on the fear trade and even exhibited a bullish “Golden Cross” technical indicator where the short-term 50-day simple moving average trendline crossed over its long-term 200-day trendline.
Given the bullish trend in gold, Holmes advises investors follow the 10% Golden Rule, which recommends a 10% weight in gold and gold-related assets. We are already witnessing major market players picking up gold as a simple way to diversify a traditional portfolio of stocks and bonds to diminish downside risks and potentially enhance returns. For example, Holmes pointed out that billionaire Ray Dalio follows the 10% Golden Rule and billionaire Sam Zell just allocated a position to gold for the first time in his life.
Along with direct gold exposure, investors can consider gold miners and sector-related ETFs like the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: 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.
U.S. Global believes royalty companies are a superior way to target the gold mining segment. Royalty companies are not responsible for costly infrastructure so huge operating expenses can be avoided. These companies hold highly diversified portfolios of mines and other assets to mitigate concentration. Additionally, they generate some of the highest revenue per employee of all public companies while growing cash flows and dividends – royalty companies’ dividend rates have been growing 12% over the five-year period ended September 2018, compared to a 9% rate for the S&P 500.
Financial advisors who are interested in learning more about the gold market can watch the webcast here on demand.