With the markets on the fritz due to the unpredictability of trade wars, Brexit, and a variety of other global events, replete with economic consequences, investors might soon be searching for risk off assets, as a means to hedge against ongoing volatility, and diversify an existing portfolio of stocks. The gold market has traditionally been a safe haven for investors in times of unpredictability. But rather than simply invest in bullion, investors and gold bugs alike can choose from stocks and ETFs as well.
While there has yet to be a stampede for the lustrous metal, there are a few ETFs that investors can consider when looking to diversify a portfolio and hedge against risk.
Investors can look to gold-backed ETFs like the SPDR Gold Shares (NYSEArca: GLD) and SPDR Gold MiniShares (NYSEArca: GLDM), while short-term traders can also play the gold market through miners with the VanEck Vectors Gold Miners (NYSEArca: GDX), Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG) and the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT).
Furthermore, investors can consider funds like the VanEck Vectors® Real Asset Allocation ETF (NYSEArca: RAAX). RAAX uses a data-driven, rules-based process that leverages over 50 indicators, including technical, macroeconomic and fundamental, commodity price, and sentiment. Using this data, it allocates across 12 individual real asset segments in five broad real asset sectors.
In addition to a smorgasbord of investments including Global Infrastructure Equities, US Real Estate Investment Trusts, Diversified Commodities Futures, and Agribusiness Equities, the VanEck Vectors® Real Asset Allocation ETF also allocates over 20% of its portfolo of holdings to gold bullion, global metals and mining equities, and gold equities.
“It increased its gold equity allocation from 13% to 16%,” wrote David Schassler, Portfolio Manager at VanEck. “This was funded by reducing its REIT position from 12% to 9%. RAAX now holds its largest gold allocation ever, with its gold bullion and gold equity allocation accounting for a combined 36% of its assets.
While markets are still processing the day to day news announcements, including changes by the Federal Reserve Board, and gold has struggled to break the pivotal $1300 level, there has been a recent flight to quality as geopolitical tensions rose in recent weeks.
“We are seeing safe-heaven buying right now with the break down in trade talks and China talking about retaliating,” Phillip Streible, senior commodities strategist at RJO Futures, told Reuters. “Geo-political risks are rising, trade tensions escalating, the dollar is down and equities are really under pressure – all these factors are boosting gold prices right now.”
For more tactical plays, visit our Tactical Allocation Channel.