So far, central banks have been voraciously eating up the global gold supply even with the expectation that rising interest rates will eventually subside.
“Central banks added a whopping 1,136 tonnes of gold worth some $70 billion to their stockpiles in 2022, by far the most of any year since 1967, the World Gold Council (WGC) said on Tuesday,” a Reuters article noted.
The article also mentioned that central banks prefer gold as a safe haven asset when it comes to protecting against the downside. While the capital markets are expecting things to improve in 2023 after a tumultuous 2022 fraught with inflation and rising rates, the central banks might be telling investors that the worst could be yet to come.
The overall hope is that a slower pace of rate hikes could eventually give way to increased investor sentiment, and so far it has, with both the stock and bond markets starting 2023 off strong. Nonetheless, no one has a crystal ball to accurately forecast the future, and gold can be an ideal asset during turbulent times.
“This is a continuation of a trend,” said World Gold Council analyst Krishan Gopaul. “You can see those drivers feeding into what happened last year. You had on the geopolitical front and the macroeconomic front a lot of uncertainty and volatility.”
2 Golden Opportunities for Exposure
Voracious investors looking to lap up gold as well can look at other options as opposed to physically holding the precious metal itself.
Investors who want gold exposure similar to holding physical gold can opt for an easier strategy via the Sprott Physical Gold Trust (PHYS). PHYS provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange.
Lastly, investors who want gold exposure with an environmental, social, and governance (ESG) component can consider the Sprott ESG Gold ETF (SESG). The fund directly sources from select gold producers that Sprott believe are leaders in ESG mining and sustainability.
SESG adds something of a backdoor play on gold prices, investing in ancillary services that support the gold market as opposed to the actual precious metal itself. Furthermore, the ESG component gives conscious investors an opportunity to allocate capital to gold miners exhibiting ESG-friendly operations.
For more news, information, and analysis, visit the Gold & Silver Investing Channel.