The capital markets are placing more bets on a Fed rate hike pause, allowing for gold to gain more momentum. Prices for the precious metal are already up 10% for the year (as of April 17) as rate pause frenzy reaches fever pitch.
Nonetheless, market experts still foresee rate hikes coming, but not at a heightened pace as they have been over the past year. Signs of inflation starting to simmer are making its way in the data, notably including the Consumer Price Index (CPI) rising 0.1% in March as opposed to 0.4% in February.
“The risks of not raising rates enough far exceeds over-tightening so the Fed is probably going to go forward with the quarter-point rate hike, the core justifies it,” said Edward Moya, senior market analyst at OANDA, in a Reuters report.
“There’s still a tremendous amount of risk on the table, so gold should still see some strong flows headed its way,” Moya added.
Gold has been getting an extra boost from the recent bank rescues of names like First Republic Bank and Credit Suisse. With fears that the banking system could be in jeopardy, investors have been piling into safe haven assets such as gold.
A Pair of Options to Get Gold Exposure
Investors looking to add gold exposure to their portfolios have a pair of options from Sprott. Firstly, they can consider the Sprott Physical Gold Trust (PHYS), which is a fund that provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange.
Additionally, for a backdoor play on ancillary gold services, investors can also take note of the Sprott Gold Miners ETF (SGDM). If demand continues to rise for gold, this can have a domino effect on miners in order to get indirect exposure to gold price movements.
Per SGDM’s fund description, the ETF seeks investment results that correspond generally to the performance of its underlying index, the Solactive Gold Miners Custom Factors Index. The index aims to track the performance of larger-sized gold companies whose stocks are listed on Canadian and major U.S. exchanges.
The index uses a transparent, rules-based methodology designed to emphasize larger-sized gold companies with the highest revenue growth, free cash flow yield, and the lowest long-term debt to equity. The index is reconstituted on a quarterly basis to reflect the companies that have the highest factor scores.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
