With record-high equity markets and low volatility reflecting increased complacency, ETF investors should think about ways to diversify against a sudden risk-off event with an asset that historically exhibits low correlation to traditional assets, such as gold.
On the upcoming webcast this Thursday, Dec. 14 (available live and on demand for CE Credit), 2018 Gold Outlook and Trends, George Milling–Stanley, Head of Gold Strategy at State Street Global Advisors, Matthew Bartolini, Head of SPDR Americas Research for State Street Global Advisors, and Juan Carlos Artigas, Director of Investment Research at the World Gold Council, will look for ways to improve risk-return characteristics in current market conditions and the role gold can play in today’s global multi-asset portfolio.
For instance, inflation could serve as a catalyst for the yellow metal and for gold-related ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter.
Another possible catalyst for gold entering the back of the year is lingering debate surrounding how many times the Fed can raise rates, especially if the tax reform bill goes through and triggers faster growth.
Moreover, in an extended bull market environment, any sudden turns or risk-off events could trigger heavy selling in risky assets like equities and cause many to shift over to the relative safety of physical assets like gold.
Investors interested in gaining exposure to gold price moves have turned to ETFs, like the SPDR Gold Shares (NYSEArca: GLD), as an easy way to access the gold market. GLD represents the fractional, undivided beneficial ownership interest in the Trust, which stores gold bullion in London vaults.
While the dollar has been one of the worst-performing developed market currencies this year, which has assisted gold at various points during the year, some currency traders believe the dollar can rebound. However, there are ways for investors to prosper with the yellow metal even if the dollar rallies.
For instance, the SPDR Long Dollar Gold Trust (NYSEArca: GLDW), which debuted earlier this year. The new gold ETF may help investors gain exposure to gold bullion price movements to hedge against potential market volatility, without worrying about the negative effects of a strengthening U.S. dollar.
Financial advisors who are interested in learning more about the gold market can register for the Thursday, December 14 webcast here.