Gold miner sector-related exchange traded funds jumped Thursday as risk aversion and inflation concerns helped strengthen gold bullion.
Among the better performing non-leveraged ETFs of Thursday, the Global X Gold Explorers ETF (GOEX) jumped 7.2%, VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ) increased 6.7%, the Sprott Gold Miners ETF (SGDM) rose 5.3%, the Sprott Junior Gold Miners ETF (SGDJ) was up 5.6%, and VanEck Gold Miners ETF (NYSEArca: GDX) gained 5.5%.
Meanwhile, the SPDR Gold Shares (NYSEArca: GLD) was 1.4% higher as Comex gold futures pushed 1.3% higher to $1,845.9 per ounce, marking their best daily percentage gain since April 12.
A number of global risks, such as the ongoing Russia-Ukraine war and zero-tolerance COVID-19 lockdown measures in China, have added to safe-haven demand for gold bullion.
Meanwhile, the U.S. dollar is pulling back from multi-year highs, which has made USD-denominated gold bullion more attractive to foreign buyers.
“An economic recession in the U.S. is now on the minds of traders and investors who were already saddled with other concerns, including the Russia-Ukraine war and Covid cases causing major cities in China to be on lockdown, which is disrupting global trade,” Jim Wyckoff, senior analysts at Kitcom.com, wrote in a note, according to MarketWatch. “A lower U.S. dollar index and a decline in U.S. Treasury yields on this day are also working in favor of the metals market bulls.”
However, analysts at HSBC Global Private Banking warned that the current environment is one that is still mixed for gold.
“Gold of course typically behaves differently from the more cyclical commodities, and the rising real rate and strong dollar are headwinds for gold, while the mixed risk appetite is a tailwind,” HSBC Global Private analysts said in its second-half investment outlook.
While inflation concerns have helped support gold as a hard asset that is a better store of wealth, the Federal Reserve is looking at multiple interest rate hikes, which would support a stronger U.S. dollar outlook and weigh on non-yield generating hard assets like gold.
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