With the coronavirus pandemic upending jewelry sales, and silver prices driving towards new highs as well, gold prices continued to surge, breaking above $2027 an ounce and pushing gold ETFs higher as well.
With lawmakers attempting to assemble a new stimulus package, governments have already injected $20 trillion of fiscal and monetary stimulus, constituting one fifth of global GDP. During the pandemic, investor demand for the gold has increased to 45 percent of the market, up from 25 percent, as fears that rates will continue to drop remain a strong catalyst for higher gold.
“The global pandemic is providing a sustained boost to gold due to increased savings, growing inequality, vast capital destruction, declining productivity, rising public debt levels, and, most importantly, falling equilibrium real interest rates,” according to strategists at Bank of America, who think the precious metal will reach $3,000 an ounce over the next 18 months.
Central banks, which have driven up gold prices since 2009, will likely continue to purchase the precious metal and be “quite supportive” of gold’s price in the coming months, said Bank of America strategist Michael Widner.
With the SPDR Gold Shares (GLD) 1.65% higher Tuesday amid rising gold futures, best-selling author Jim Rickards’ analysis also suggests higher prices for the metal. Rickards envisions gold reaching $15,000 by 2025.
“I would put [gold at $15,000 an ounce before 2025,” Rickards told Kitco News recently. “If you just take the average of the prior bull markets: 1971 to 1980, nine years, 2200%, 1999 to 2011, a twelve-year bull market, about 700%. Just take the average, you don’t have to go to the higher of the two or extrapolate, if you just take the average of the two you would say the next bull market is going to be a little over 10 years and it’s going to go up 1500%,” he said.
Although the rapid spike in the precious metal could certainly warrant a pullback, ETF investors can get gold exposure via miners ETFs which are rallying strongly Tuesday using the following funds:
- VanEck Vectors Gold Miners (NYSEArca: GDX): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE® Arca Gold Miners Index®. The index is a modified market-capitalization weighted index primarily comprised of publicly traded companies involved in the mining for gold and silver.
- Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG): seeks daily investment results, before fees and expenses, of 200% of the daily performance of the MVIS Global Junior Gold Miners Index. The index includes companies from markets that are freely investable to foreign investors, including “emerging markets,” as that term is defined by the index provider.
- Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT) : seeks daily investment results, before fees and expenses, of 200% of the daily performance of the NYSE Arca Gold Miners Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in the mining for gold and, in mining for silver.
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