As Treasury yields continue to skydive, gold price levels could go through the roof as the scrambler for safe haven assets continues amid the latest market volatility as trade wars between the U.S. and China rage on. This could provide more gains for gold-focused exchanged-traded funds (ETFs) as analysts are predicting that the precious metal could shoot past the $2,000 per ounce price mark.
“We have a long position trade on. We are targeting $1,585,” said Daniel Ghali, commodities strategist at TD Ameritrade. “We do think gold is on its way higher for the time being…Over the coming years as the likelihood of the unconventional policy becomes more of a reality, I could see a case for gold at $2,000.”
The case for gold was certainly assisted by the Federal Reserve who implemented a rate cut of 25 basis points recently. The weakness in the U.S. dollar caused gold to climb, but the case for the precious metal is also coming from the bond markets.
Bond yields have been sinking to fresh lows as investors continue to pile in on safe haven government debt.
“Negative yields are symptomatic for the search for safe assets. The reason they’re trading at negative yields is because the demand for safe assets is bigger than the supply for them,” said Ghali. “Gold stands to benefit quite a bit from that.. the trade we’ve been recommending we have it as a three moth time horizon. I would argue we are likely on the cusp of a multi-year bull market for gold.”
For many investors, gold is the standard in precious metal investing, which has become more accessible than ever thanks to options via an exchange-traded fund (ETF) wrapper like the SPDR Gold MiniShares (NYSEArca: GLDM).
In addition, investors can look at exchange-traded funds (ETFs) like the SPDR Gold MiniShares (NYSEArca: GLDM) and SPDR Gold Shares (NYSEArca: GLD). Adding precious metals to a portfolio certainly speaks to the diversification benefits of gold, among other things.
Leveraged exchange-traded fund (ETF) traders can look to funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT) rise. Additionally, short-term traders can also play the gold market through miners via the VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
“The motivation behind the respective reserve strategies varies, with the historical positioning, the long-term store of value, gold’s role as an effective portfolio diversifier and lack of default risk featuring the highest among EM and DM institutions. De-dollarization features as well as a motivation,” wrote Bank of America Merrill Lynch’s metals strategist Michael Widmer.
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