Gold rallying may have been unforeseen by some, but to the vast majority, it could still offer a bullish investment prospect especially with interest rate cuts looming.
The precious metal is up over 20% for the year, surpassing the S&P 500’s 19% gain. The equities rally has been powered by the artificial intelligence (AI) theme, while gold has been supported mainly with strong central bank buying.
It was only until recently that a dose of volatility in the equities market has been spurring a flight to gold as a safe haven asset. Combined with geopolitical tensions and a forthcoming U.S. presidential election, more investors could be seeking gold to help mute equities market volatility.
Moreover, forthcoming interest rate cuts could be conducive to higher gold prices, according to the Financial Times. With the prospect of a lower dollar via rate cuts, gold has been seeing strong demand as evidenced by the latest inflows into gold-focused ETFs.
“Traditionally, gold is seen as a better investment when rates are low and when other asset classes are not up to much,” the Financial Times noted, saying that the current gold rally has staying power. “By this token, it should have had a dim start to 2024 given the unexpectedly strong performance of US equities, the resilience of the economy, and a delay to expected Federal Reserve rate cuts.”
2 Options for Easy Gold Access
With tailwinds blowing behind gold, it’s an opportune time for exposure with a pair of options from Sprott: the Sprott Physical Gold Trust (PHYS) and the Sprott Gold Miners ETF (SGDM). PHYS offers a more pure-play gold exposure experience, while on the other hand, SGDM is more indirect via gold miners.
For investors looking to add a more tangible gold investment experience, PHYS is ideal. The fund allows investors to have the option of converting their PHYS shares into physical bullion. This offers feasibility and flexibility when it comes to adding the precious metal to diversify a portfolio. Likewise, they can retain their shares of PHYS and still get gold exposure without having to store the physical commodity.
As mentioned, SGDM can build off gold’s demand momentum with its exposure to miners. The fund seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of large gold companies found on Canadian and major U.S. exchanges.
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