As global economies continue their healing process in 2021, central banks like the U.S. Federal Reserve could be re-thinking their respective monetary policies. If the Fed sees the economy languishing, more dovishness could feed into strength for gold and ETFs like the VanEck Merk Gold Trust (OUNZ).
OUNZ, which was up about 24% in 2020, seeks to provide investors with an opportunity to invest in gold through the shares and delivery of physical gold in exchange for those shares. Summarily, 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.
Gold started to track lower in late summer as more confidence in the equity markets gained steam, causing a bearish downtrend heading into the start of winter. Then, as more Covid-19 cases started to mount, a flight back to safety occurred in December.
As for a buying opportunity, OUNZ is below overbought levels in its relative strength index (RSI). In addition, adding a moving average convergence divergence (MACD) filter renders the exponential moving average (EMA) above the signal line, which could mean a buying opportunity is prescient.
More Bullishness in 2021 for OUNZ?
The question now is whether gold and OUNZ can sustain their December rallies. Some analysts are forecasting more strength ahead for gold as economies continue to heal.
“Despite the liquidity flooding the financial markets, inflation outlook in major economies remains subdued and major central banks voiced their commitment to keeping their policies extremely loose until they see a convincing increase in price pressures. This suggests that investors will not give up on gold in the near future,” an FXStreet article said. “On the other hand, a return to normality with mass COVID-19 vaccinations could make risk-sensitive assets more attractive, especially in the second half of 2021, and dampen the demand for the yellow metal.”
“Overall, gold outlook remains bullish with the rate of increase in prices softening when compared to 2020,” the article added.
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