The Federal Reserve recently stated that monetary policy will stay tight for longer than anticipated. Therefore, gold bulls could continue to see downward pressure on prices. However, the Fed did leave the door open for eventual rate cuts, offering some hope.
In addition to gold, the higher-than-longer interest rates narrative is also applying pressure on stocks and bonds. Bond prices pushing lower means yields are pushing higher. This adds to an already strong dollar — an unideal situation for bullish gold investors.
Still, there’s always the potential catalyst for a recession that could push investors to safe haven assets like gold. Supporting gold prices is also central bank buying, so the bottom hasn’t essentially fallen out for gold.
“Certainly a portion of the market, still sees a higher chance that a recession will be on the cards… also physical and central bank demand has remained fairly firm throughout,” said Ryan McKay, commodity strategist at TD Securities.
If anything, falling gold prices opens up opportunities for investors to purchase gold at a value-oriented price. As opposed to purchasing physical gold, there are other options available via exchange traded funds (ETFs).
Get Value-Driven Gold Exposure
For investors looking for easy gold exposure via a gold fund, consider the Sprott Physical Gold Trust (PHYS), which provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange. PHYS provides gold exposure without the logistical challenges of storing gold. However, shares are redeemable for physical bullion if the investor so chooses.
An alternate play on gold prices is via ancillary gold services like mining, which offers opportunities in 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 gold companies on Canadian and major U.S. exchanges.
Recently, the World Gold Council pledged to focus on more transparency in the gold mining industry. This could provide an impetus for more capital investment in gold mining projects moving forward.
“I am delighted that our members have committed to lead the way in transparency,” said David Tait, CEO of the World Gold Council. “Pursuing enhanced supply chain transparency is good for the companies who produce, the communities who benefit from employment, training and skills, and investors and consumers, who can be assured their gold has been responsibly produced and responsibly traded. The responsible gold mining industry should be rightly proud of the positive impact they have on the communities and countries where gold is mined.”
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