Despite Record Highs, Gold Rally Could be in Early Stages

Gold has been pushing above the $2,100 price mark recently. But the precious metal’s rally could still be in its early stages. Peter Schiff, founder of Schiff Gold, and chief market strategist of Euro Pacific Asset Management, thinks the current rally still has legs.

“A lot of people are taking this to mean that that’s it. That this is some kind of blowoff top; this is the end of the gold bull market,” Schiff said in a YouTube video. “I think this is just the beginning.”

Schiff mentioned that gold’s resilience came amid aggressive rate hikes by the Federal Reserve to tamp down inflationary pressures. Indeed, even amid a stock market comeback where the S&P 500 is up 20%, investors haven’t ditched gold in a flight from safe haven assets. The metal is up 11% year to date.

What’s Feeding the Extended Rally

“Even in the face of relentless Fed rate hikes and tough talk about doing whatever it takes to combat inflation, gold has held pretty firm despite what the markets perceive as very strong headwinds, with a strengthening dollar and rising yields that are normally perceived as a big negative for gold,” said Schiff.

He also isn’t concerned about rate cuts in 2024. That’s currently the prevailing sentiment heading into the new year. Rate cuts could potentially bring forth a weaker dollar, thus feeding into gold’s extended rally.

“Wall Street is already pricing in rate cuts as early as Q1, Q2 of next year. So the hikes are over as far as Wall Street is concerned,” Schiff added. “If gold couldn’t go much below $2,000 when the Fed was hiking rates, imagine where it can go now that it stopped hiking and is about to cut.”

For exposure to rising prices for the yellow metal, investors can consider allocating to the Sprott Physical Gold Trust (PHYS). The fund provides an enhanced physical bullion structure. This structure offers the ease of purchase and sale that comes with being traded on a stock market exchange. Shares are redeemable for the precious metal bullion if the investor wants the feel of a more tangible investment.

Gold Mining ETFs Also in Play

An alternate play on these rising prices is via the use of ancillary services like mining companies. Whether investors are interest in large-cap companies or the growth prospects of small caps, Sprott has two mining ETFs worth considering. For large caps, consider the Sprott Gold Miners ETF (SGDM). The ETF seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of larger-sized mining companies on Canadian and major U.S. exchanges.

As mentioned, an alternative to SGDM is the more growth-oriented Sprott Junior Gold Miners ETF (SGDJ). The fund tracks the Solactive Junior Gold Miners Custom Factors Index, which follows the performance of the small-capitalization precious metal companies.

For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.