Precious Metals ETFs Shine as Traders Hedge Coronavirus Risks

Precious metals-related exchange traded funds climbed Friday as renewed coronavirus fears helped support safety bets.

Among the best performing non-leveraged ETFs of Friday, the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU) advanced 2.4%, Sprott Gold Miners ETF (NYSEArca: SGDM) added 2.9%, VanEck Gold Miners ETF (NYSEArca: GDX) gained 2.5% and the Global X Silvers Miners ETF (NYSEArca: SIL) increased 2.2%.

Meanwhile, the SPDR Gold Shares (NYSEArca: GLD) rose 0.9% on Friday as Comex gold futures were 1.3% higher to $1,753.1 per ounce. The  iShares Silver Trust (SLV)  gained 1.2% while Comex silver futures were 2.0% higher to $18.0 per ounce.

Precious metals were strengthening on safe-haven demand on heightened anxiety over the rise in COVID-19 cases in China and the U.S.

Lukman Otunuga, senior research analyst at FXTM, pointed out that gold concluded the week on a positive note as “rising coronavirus cases in China and the United States accelerate the flight to safety,” MarketWatch reports.

“There is a thick smog of caution in the air with investors on high alert amid the COVID-19 developments [and]global sentiment still fragile despite equity markets edging higher,” Otunuga told MarketWatch. “Expect gold to shine through the smog and smoke over the coming weeks if risk aversion becomes a dominant market theme.”

Goldman Sachs also projected a favorable gold outlook as aggressive monetary policies will fuel debase the dollar and drive up inflation. Goldman analysts raised their 12-month gold forecast by 11% to $2,000 per ounce, highlighting low-real interest rates and concerns over the U.S. dollar.

“However, as we have argued in the past gold investment demand tends to grow into the early stage of the economic recovery, driven by continued debasement concerns and lower real rates,” Goldman Sachs said in a note, according to CNBC. “Simultaneously we see a material comeback from EM consumer demand boosted by easing of lockdowns and a weaker dollar.”

HSBC Senior Precious Metals Analyst James Steele also argued that fundamental drivers like greater demand in emerging markets could further support the gold outlook.

“The two most populous nations in Asia are also the world’s two largest gold importers and consumers. Further escalation in risks could prompt greater gold purchases,” Steele told CNBC.

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