It’s more than likely no surprise that consumer confidence dipped during the month of March as the coronavirus pandemic still has a tight grip on the global markets. However, despite this lower confidence, gold was unable to capitalize, but the uncertainty surrounding the effects of the virus still favors the precious metal.
“Consumer confidence declined sharply in March due to a deterioration in the short-term outlook,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs. March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.”
Gold prices fell as much as 1% in Tuesday’s trading session before rising to settle at $1,675 per ounce following the close of the stock market. Any news reflecting doom and gloom here on out should fuel prices as investors seek safe haven assets.
Per a CNBC report, “Goldman Sachs economists expect the U.S. economy to contract by 34% in the second quarter and U.S. unemployment to surge to 15% before the fastest-ever recovery takes place. The S&P 500 has tumbled more than 20% from record levels seen in late February.”
Precious metals like gold offer investors an alternative to diversify their holdings. Like other commodities, gold will march to the beat of its own drum compared to the broader market.
Due to this negative correlation, large downturns in the broad market may not affect commodities. By investing in gold ETFs versus physical gold, investors can also reap the benefits of an ETF like its tax efficiency, as liquidity to buy or sell quickly in the markets.
Gold ETFs can be bought and sold freely via an exchange when compared to physical gold. As such, investors can utilize the hedging properties of gold without having to endure the costs of actually owning and storing the asset like they would with physical gold.
Investors looking to get gold exposure can look at funds like SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM). Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
Traders looking for leverage can use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
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