As global central banks begin to loosen their monetary policies to support the growing economies, investors should consider gold-related ETFs to maintain their purchasing power.
“Gold’s long-term prospect is up, up and up, and the reason why I say that is money supply is up, up and up,” Mark Mobius, who set up Mobius Capital Partners LLP last year after three decades at Franklin Templeton Investments, told Bloomberg. “I think you have to be buying at any level, frankly.”
Comex gold futures were 0.3% higher to $1,517 per ounce on Tuesday. Gold has hit a six-year high this month on bets of easier monetary policy out of the Federal Reserve and other global central banks to support growth that has been weighed down by a protracted U.S.-China trade war.
“With the efforts by the central banks to lower interest rates, they’re going to be printing like crazy,” Mobius said, recommending investors should allocate about 10% of a portfolio to physical bullion.
Gold’s inverse relationship to U.S. dollar
Gold has exhibited an inverse relationship to the U.S. dollar. U.S. investors look to the physical asset as a better store of wealth when the currency depreciates while foreign investors are able to buy more of the cheaper USD-denominated gold bars.
If markets see global central banks enact further monetary policies to bolster their local economies and weaken their domestic currencies through greater money supply, investors may look to gold-related ETFs as a way to better safeguard their wealth or purchasing power. There are now a number of gold ETFs on the market that investors can choose from, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEARCA: IAU), GraniteShares Gold Trust (BAR), Aberdeen Standard Physical Swiss Gold Shares ETF (NYSEArca: SGOL) and VanEck Merk Gold Trust (NYSE Arca: OUNZ). The gold-related ETFs are backed by gold bullion stored in a vault, so investors essentially gain direct exposure to physical gold through these ETFs.
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