Gold was an obvious disappointment last year in the broader commodities complex, but the yellow metal is getting its act together, providing support for a variety of exchange traded funds, including the VanEck Merk Gold Trust (OUNZ).
OUNZ “seeks to provide investors with a convenient and cost-efficient way to buy and hold gold through an exchange traded product with the option to take physical delivery of gold,” according to VanEck.
What makes the $618.3 million OUNZ unique is that investors can take physical delivery of bullion upon redeeming shares of the fund. Whether it’s shares of OUNZ or physical gold attained through a sale of the ETF’s shares, the VanEck is a potentially alluring idea as bullion bounces back.
“Gold had been relatively boring for quite a while. After surging in 2020, its price has essentially traded sideways for the past 18 months, falling just 5.6% from $2,013.10 to $1,900.80 an ounce. Now it’s on the move,” reports Ben Levisohn for Barron’s. “That makes complete sense. Gold is often thought of as protection against inflation, but it’s really protection against chaos—and the situation in Ukraine certainly counts as chaos. That has helped push the price of gold up 5.8% in February, putting it on pace for its best month since May 2021.”
While there may be a diplomatic resolution to the Russia/Ukraine standoff, that’s unlikely to dent the cases for gold and OUNZ because inflation remains stubbornly high in the U.S. Plus, the yellow metal still has ample room to return to its prior highs.
“The precious metal, despite the move, is still trading below its spring 2021 high of $1,909.90 and could be ready to break out. At the same time, there are also few technical signs that the gold rush is getting exhausted,” according to Barron’s.
Additionally, there’s still a strong demand case for gold, which could support upside for OUNZ as 2022 unfolds. Importantly, this demand goes well beyond jewelry and retail investment demand.
“Central banks in emerging markets have been buying gold as a way to diversify away from the dollar, notes BofA Securities commodity strategist Michael Widmer. El Salvador’s failed dalliance with Bitcoin is likely to encourage that trend,” notes Barron’s.
OUNZ gained nearly 2% last week.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.