As the coronavirus outbreak continues to be the wild card in the markets, the safe haven of precious metals is in high demand, especially for exchange-traded funds (ETFs) that are backed by gold. ETFs have been stockpiling gold as more coronavirus news continues to invade the financial markets.
According to a Kitco news report, gold holdings by “physically backed exchange-traded funds have risen for 12 consecutive business days, said BMO Capital Markets. The ETFs trade like a stock but track the price of gold, with the commodity put into storage to back the shares. Holdings continue to rise as ‘portfolio positioning retains a defensive hedge amid coronavirus concern,’ BMO said.”
“With so much uncertainty still around the coronavirus outbreak, especially about its implications on the global economy, perhaps investors are getting complacent about the severity of the total economic toll, hoping that monetary and fiscal support can come to the rescue,” said Han Tan, market analyst at FXTM. “While stocks may continue riding on such hopeful sentiment, other assets such as Asian currencies and major commodities may be more reflective of the economic fundamentals, as the outbreak remains a major negative risk.”
Last week, gold took a back seat on better-than-expected employment numbers. Market investors are still watching whether the extended bull rally is on its last legs, but while they’re waiting, the economic fundamentals still show signs of strength–private payrolls rose by 291,000 during the month of January, which constituted its best month since May 2015, based on data from ADP and Moody’s Analytics.
The latest number bested the 150,000 estimate expected by economists surveyed by Dow Jones. Furthermore, data shows that the gap between full employment is still a good distance given that unemployment is at historically low levels.
Getting Metals Exposure Via ETFs
Investors looking to get in on gold 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).
Investors looking at other precious metal alternatives can get in on the palladium action by looking to the Aberdeen Standard Phys PalladiumShrs ETF (NYSEArca: PALL). PALL seeks to reflect the performance of the price of physical palladium, less the expenses of the Trust’s operations—the fund is designed for investors who want a cost-effective and convenient way to invest in palladium with minimal credit risk.
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