Thursday’s cooler consumer price index (CPI) print drove gold’s price to its highest point since August, as investors’ hopes that inflation would finally respond to the Fed’s rate hikes were fulfilled. With inflation dropping, investors expect gold to appreciate in value, which could set up a good opportunity for a gold miner ETF like the Sprott Gold Miners ETF (SGDM).
Gold futures climbed Thursday amid a pullback in the U.S. dollar and Treasury years behind the good CPI news. The print showed 7.7% year-on-year inflation compared to the 7.9% expected, and less than the 8.2% rise in the September CPI report. Inflation also rose 0.4% over the prior month, compared to an expected 0.5% increase.
Gold bears have certainly had their case over the last several months, with the mineral’s price dropping from a March high of $2,039 per ounce to $1,674 per ounce at press time. But the data suggests that the gold market may have reached its bottom, hovering around $1,650 for the last month or so, and with investors diving into stocks following the news and ditching their yield-oriented debt holdings, gold could be primed for a jump.
SGDM, along with the Sprott Physical Gold Trust (PHYS), an alternative that offers direct exposure to bullion, represents an interesting option for gold-curious investors. The ETF’s performance has picked up over the last several weeks, returning 5% over one month compared to its returns of -4.8% over the last three months and its -17.6% return YTD. SGDM has taken in $16 million in YTD flows, meanwhile.
The ETF tracks the Solactive Gold Miners Custom Factors Index and currently holds several gold and gold-mining firms in its portfolio, with none weighted higher than the Newmont Corporation (NEM) at 12.15%. NEM is up 18.15% over the past five days, having dropped 32% over the last six months.
Gold has the potential to rise if the Fed manages to successfully whip inflation going into next year, making SGDM, as well as PHYS, potent opportunities for investors on the lookout for exposures in a gold miner ETF.
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