With the U.S. election largely over and done with, the market has already begun to react. Savvy investors may look to gold to diversify away from the stock market.
For now, traders have been able to cash in from market sectors across the board. This morning, U.S. equities, bitcoin, and bank stocks all soared following the results of the election.
However, it’s important to remember that this rally may not last. The direction of U.S. stocks and cryptocurrencies could easily shift as new U.S. leadership gears up to take power. Now more than ever, investors should consider adding strategies to their portfolios to add exposure outside of the broader equity market.
Investing in gold is one of the more storied strategies for diversifying away from the stock market. Historically, it tends to preserve its value and do well, even when the U.S. dollar experiences turbulence. The following chart illustrates how it has enjoyed steady gains this year, even as the dollar’s international value has varied widely.
Through the flexible benefits of the ETF wrapper, investors can tap into a menagerie of different gold strategies. Some gold ETFs can offer a risk-averse hedge from the stock market, while others can chase returns from a gold rally.
Hedge Your Risk With Gold
For investors looking for a means to keep their investment safe, the SPDR Gold Shares (GLD) can be a reliable choice. The fund offers cost-efficient access to the gold market.
Given that GLD is physically backed by bullion, investors can use the fund to avoid the uncertainty present in strategies that use futures. As such, the fund remains a highly-trusted choice by investors, with GLD seeing over $1.4 billion in net flows from Oct. 1 to Nov. 1, according to FactSet.
Chasing Daily Returns
Even though it is frequently used to de-risk a portfolio, savvy traders can chase returns from the precious metal. One means of doing so is by using an ETF like the ProShares Ultra Gold (UGL). UGL offers a leveraged gold play that seeks 2x the daily results of the Bloomberg Gold Subindex.
Given its strong yearly performance thus far, chasing short-term returns from the commodity could make sense. However, leveraged products carry inherent risk and are best used by traders who are prepared to monitor daily price movements.
All in all, it can be a far more versatile investment vehicle than investors may realize. Whether traders are looking to keep their assets safe or bet big on commodities, a gold strategy can work for every investment style.
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