Weaker Dollar, Frothy Market Could Keep Fueling “GLD” Gold ETF

Something interesting is going on in the recent market rally the past couple of weeks—though equities, particularly technology stocks, are rebounding after the pandemic sell-offs in March, a lot of investors are sitting on the sidelines. One way to approach the market is by looking at real assets like precious metals like gold via the SPDR Gold Shares (NYSEArca: GLD).

According to global investment firm JP Morgan, the current market environment is ideal for a 50% rise in stocks. With bond yields at historic lows and the central bank willing to keep them near zero through 2022, this backs investors into a corner and the only way out is to put more money in stocks.

“Our most holistic of our equity position metrics, which compares the size of the equity universe to the size of the bond and cash universe, implies 47% upside for equities from here assuming the implied equity allocation of non-bank investors globally rises from 40% currently to the post Lehman period high of 49%,” Nikolaos Panigirtzoglou, a managing director at JPMorgan, said in a note on Friday, according to a CNBC article.

Equity exposure via ETFs can be had with the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), which seeks to provide investment results that closely correspond to the performance of the Goldman Sachs ActiveBeta® U.S. Large Cap Equity Index. The index is designed to deliver exposure to equity securities of large capitalization U.S. issuers.

However, another way to play the market is looking at tangible assets like gold, but investors who want the diversification into precious metals can do so without having to own and store the actual assets.

“The gold market could be a nice way to sort of hedge a potentially overbought stock market,” Gordon said, adding that a weakening U.S. dollar and low-interest-rate environment are “generally supportive of gold.”

“If we look at the ETF GLD that tracks the underlying gold futures, it’s been an amazing run,” he said, citing a chart of the SPDR Gold Shares Trust (GLD). “It looks like we’re heading back up towards the highs, potentially.”

For GLDM investors specifically, the ETF offers the following benefits:

  • The investment objective of SPDR® Gold MiniShares Trust (GLDM) is for the Shares of GLDM to reflect the performance of the price of gold bullion, less GLDM’s expenses
  • Shares of GLDM are designed for investors who want a cost-effective and convenient way to invest in gold and will be offered on a continuous basis
  • For many investors, costs associated with buying and selling the Shares in the secondary market and the payment of GLDM’s ongoing expenses will be lower than the costs associated with buying and selling gold bullion and storing and insuring gold bullion in a traditional allocated gold bullion account

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