Rising interest rates have been putting downward pressure on gold, but the shaky banking sector recently pushed prices past the $2,000 mark. With investor confidence in banks waning, this could continue to bolster gold prices as they seek to add precious metals for safety.
Along with the rescue of U.S. regional bank First Republic, Europe’s Credit Suisse has been grabbing the financial news as of late with its recent rescue thanks to help from global investment bank UBS. Bank rescues can help re-instill market confidence, but more bank failures could continue to push investors to safe havens like gold.
“Long-term damage has been done to the credibility of U.S. banks,” said Chintan Karnani, director of research at Insignia Consultants, who also noted in a MarketWatch report that the banking fallout could be just be the tip of the iceberg. “Significant price corrections (if any) in gold price will be for a very short period.”
3 Options for Gold Exposure
There are three options where investors can get gold exposure. For direct correlation to holding physical gold, 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.
Investors looking for gold exposure with an environmental, social, and governance (ESG) component can also consider the Sprott ESG Gold ETF (SESG). The fund directly sources from select gold producers that Sprott believe are leaders when it comes to ESG mining and sustainability.
Lastly, for a play on ancillary gold services, investors can also consider the Sprott Gold Miners ETF (SGDM). If demand continues to rise for gold, this can have a domino effect on miners for indirect exposure to gold prices.
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.