Gold exchange traded funds, including the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM), are among the stars of the commodities exchange traded products universe this year and that brightness could be amplified following Election Day.
Gold has been a popular play for investors to hedge against ongoing volatility, uncertainty, and inflationary risks. The coronavirus pandemic has ravaged economies and fueled heightened uncertainty, which has in turn helped support gold as a safe-haven bet. Meanwhile, the copious amounts of fiscal and monetary stimulus measures have inundated the markets with cash, fueling demand for physical assets like the hold that can help investors maintain their purchasing power.
With a presidential election just a few weeks away, GLD and GLDM are worth monitoring.
“Heading into year-end, the divisive US general election has cast a further shadow of ambiguity for investors in 2020 that may help further gold’s momentum,” notes State Street head of gold strategy Maxwell Gold. “While US politics and the pending election represent an important factor that may impact global markets and volatility in the near term, broader global economic and market implications from future US policy decisions likely remain more impactful over the medium and longer term.”
Going For Gold Post-Election
It’s been a banner year for gold exchange-traded funds (ETFs) and more market uncertainty ahead could keep feeding into more inflows. With Q4 still left to go and gold ETF holdings rising for a 10th consecutive month, gold could set a new record high.
Additionally, GLD and GLDM are appealing after Election Day because, historically, gold isn’t politically sensitive.
“Generally, gold has posted positive returns when either political party — Republican or Democrat — sits in the White House,” says State Street’s Gold. “But the yellow metal has historically performed slightly better when a Democrat has been in the Oval Office compared with a Republican — 11.2% vs. 10.2%, respectively. While gold appears to fare well regardless of party politics when it comes to the presidency, this does not appear to be the case for the US Congress.”
Even with the sell-offs as of late, it’s good to be gold right now. With more market uncertainty ahead, the precious metal is still topping the list when it comes to exchange-traded fund (ETF) choices, and investors who want gold exposure can look to ETFs to fill that need. 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.
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