Outlook for Gold: What’s Ahead for 2020 | ETF Trends

Gold had a stellar 2019 – thanks to geopolitical risks and strong central bank buying. Since 2010, central banks have been net buyers of gold, with especially strong buying the past two years, demonstrating the metal as a store of value. Institutional investors have taken note and last year saw record inflows into gold-related investment products. However, the generalist investors have still not jumped into the space. If more investors do allocate to gold this decade, it could lead to a big bullion rally.

In the upcoming webcast, Outlook for Gold: What’s Ahead for 2020, Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors; and Dr. Martin Murenbeeld, President, Murenbeeld & Co., will outline the potential benefits of holding gold exposure and how it can fit into a diversified portfolio.

Gold will outperform the S&P 500 Index in 2020, Holmes said in a recent note. That’s one of several projections made by CLSA in its just-released “Global Surprises 2020” report.

“If investors are concerned about the role of liquidity in recent equity market strength… gold provides a hedge that could perform across multiple scenarios,” CLSA’s head of research Shaun Cochran, said.

The precious metal is especially useful in an era of perpetually loose monetary policy.

“[I]n the event that growth disappoints the market’s expectations, gold is positively leveraged to the inevitable policy response of lower rates and larger central bank balance sheets,” Cochran added.

As a way to gain exposure to the potential rise of gold, investors may focus on a fund strategy that incorporates royalty and streaming companies, which many consider to be the “smart money” of the space, such as the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU). The U.S. Global GO GOLD and Precious Metal Miners ETF is a smart beta offering that tracks a specialized or rules-based index to help hone in on quality players in the gold mining space. The underlying U.S. Global GO GOLD and Precious Metal Miners Index uses quantitative analysis designed to capture the performance of companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means.

The ETF also includes a 30% tilt to royalty and streaming companies, which could help investors better manage common risks associated with traditional producers, such as building and maintaining mines, among others. The lower risk may also diminish risk since royalty companies have historically rewarded investors by increasing dividends at a faster pace than the broader equity market.

According to U.S. Global, royalty companies are a superior way to target the gold mining segment. Royalty companies are not responsible for costly infrastructure so huge operating expenses can be avoided. These companies hold highly diversified portfolios of mines and other assets to mitigate concentration. Additionally, they generate some of the highest revenue per employee of all public companies while growing cash flows and dividends.

Financial advisors who are interested in learning more about the gold market can register for the Thursday, February 20 webcast here.