The pandemic gave rise to a golden era for gold prices in 2020, but will the good times continue? Additional stimulus measures could provide more bounce to gold ETFs like the VanEck Merk Gold Trust (OUNZ).
OUNZ seeks to provide investors with an opportunity to invest in gold through the shares, taking delivery of physical gold in exchange for those shares. The Trust’s secondary objective is for the shares to reflect the performance of the price of gold less the expenses of the Trust’s operations.
Each share represents a fractional undivided beneficial interest in the Trust’s net assets. The Trust’s assets consist principally of gold held on the Trust’s behalf in financial institutions for safekeeping.
OUNZ offers investors:
- Deliverability: VanEck Merk Gold Trust holds gold bullion in the form of allocated London Bars. It differentiates itself by providing investors with the option to take physical delivery of gold bullion in exchange for their shares.
- Convertibility: For the purpose of facilitating delivery, Merk has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
- Tax Efficiency: Taking delivery of gold is not a taxable event as investors merely take possession of what they already own: the gold.
Looking at the momentum of OUNZ via its relative strength index (RSI), the fund is just about to dip below oversold territory. This could bring about a nice round of buying that could prop up prices further.
The Conditions Driving Gold to an All-Time High
Gold is looking at a confluence of events to keep it going. Obviously, there’s the pandemic, but the weaker dollar, rising inflation, low yields, and more market volatility all stand to contribute.
“The conditions that drove gold to an all-time high this year are very much still in place. I think it’s just natural that once you get to an all-time high in an asset class, there’s some consolidation afterwards and that’s what we’re seeing right now in terms of the price,” said GraniteShares founder and CEO Will Rhind on an “ETF Edge” interview on CNBC. “But the fundamental conditions are still here and I believe that they will be here for the next 12-15 months minimum as well.”
“I’m the first one to point out that gold is a nonproducing asset. It’s a psychological commodity, meaning it’s only worth what somebody else will pay for it,” said Dave Nadig, chief investment officer and director of research at ETF Trends and ETF Database, in the same interview. “That being said, it’s hard to argue with thousands of years of history of folks looking to gold as a store of value in times of crisis, and I don’t know what we’re in if it’s not a time of crisis.”
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