Precious metals exchange traded funds are regaining their luster as three-decade high inflation pushed investors toward hard assets that help protect their purchasing power.
Over the past month, the iShares Silver Trust (SLV) was up 11.9%, the Sprott Physical Silver Trust (PSLV) added 11.8%, the SPDR Gold Shares (NYSEArca: GLD) was 6.0% higher and the Sprott Physical Gold Trust (PHYS) gained 6.3%. Meanwhile, Comex gold futures were hovering around $1,864.8 per ounce and Comex silver futures were at $25.1 per ounce.
The most actively traded gold contracts just finished their best week in six months after updated data revealed that persistent supply shortages and strong consumer demand pushed up prices at the fastest 12-month pace since 1990, the Wall Street Journal reports.
The spike in inflation fueled bets that elevated consumer princes could linger longer than Federal Reserve officials previously anticipated, adding to gains in various inflation-hedging assets, including Treasury inflation-protected securities and gold.
“Despite both U.S. rates and the dollar rising of late, gold seems to have found its stride and is focusing on the troubling inflation picture instead,” Ed Meir, a consultant focused on metals at brokerage ED&F Man Capital Markets, said in a note.
Additionally, the precious metal’s surge helped lift it to a five-month high, ending months of sideways action, which analysts warned was sign of Wall Street complacency about the elevated inflationary pressures. Investors have for years turned to gold for its traditional store of value against a depreciating U.S. dollar, so the recent stability in gold’s price indicated that many didn’t expect inflation to erode returns in other assets.
Nevertheless, gold prices remain 10% lower than their record highs of above $2,050 per ounce from August 2020, when risk-off selling from ongoing concerns over the coronavirus pandemic fueled safe-haven bets.
“We’re really seeing investors say, ‘Well, this inflation could be a little more sticky, so we do need to add precious metals,’” Chris Gaffney, president of world markets at TIAA Bank, told the WSJ, adding that he has recommended that clients raise gold allocations toward the upper end of his normal 5–10% range.
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