Have you heard? Gold prices are up and lifting the precious metal back into the conversation for 2023. The year’s first Federal Open Market Committee (FOMC) meeting between January 31 and February 1 is fast approaching, prompting investors to look for reliable options. One such option could be gold, given how some factors like real yields and the dollar are moving, with exposure to gold available in a gold miners ETF like the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN).
Investors have helped gold rally from a September low based on the most actively traded gold futures contract, up 20% to more than $1,940 per ounce. Prices are also approaching their longest weekly winning streak since August 2020 with the pandemic at one of its worst periods. While rising real yields thanks to the Fed’s rate hikes took their toll on gold, that picture looks to be changing.
Indeed, the pressure on the price of gold has lessened with the 10-year TIPS yield down to 1.2% and the dollar down about 10% from a year-long high in late September per the WSJ Dollar Index. Those factors are also building on foreign central banks buying gold themselves, perhaps stocking up for a world that continues to face geopolitical and monetary instability.
While fixed income yields could look good now, gold has a longer-term case and is available in gold miners ETFs like GDMN. GDMN is actively managed, offering exposure to gold as both a commodity and via equities. Gold miners must make at least 50% of their revenue from gold mining to be included in the ETF, added on a modified market-cap weighted basis.
The ETF charges 45 basis points for its exposures and could offer some needed diversification for investors outside of traditional equities and bond splits. Gold could be an interesting play in a year that is just getting started with volatility and uncertainty, and should the Fed make just a few more hikes, yields may settle in a place at which gold can be an interesting option in a gold mining ETF like GDMN.
For more news, information, and analysis, visit the Modern Alpha Channel.