How Rate Hikes Could Make 'OUNZ' A Long-Term Play

The prospect of rate hikes by the Federal Reserve has become more apparent of late, with Treasury yields ticking higher and fears of inflation starting to sprout. Gold investors should consider playing the long game with funds like the VanEck Merk Gold Trust (OUNZ).

OUNZ 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.

The time could be right for a buying opportunity in OUNZ given gold’s recent weakness. The fund’s 50-day moving average is below its 200-day moving average, while the relative strength index (RSI) is somewhere between overbought and oversold levels.

To further confirm a buying opportunity, one more indicator could be added in the moving average convergence divergence (MACD) filter. The exponential moving average (EMA) and signal line are sitting in overbought territory, but the EMA is crossing up the signal line, which could mean prices will be heading upwards.

OUNZ Chart

Is Gold Starting from the Bottom?

Analysts are already predicting that gold may have now hit a bottom, further signaling a potential area of value for investors. A recent Kitco News report noted that there are now “signs that gold has found a bottom after a streak of weekly losses, according to analysts.”

“Now, the focus is shifting to the Federal Reserve’s rate announcement on Wednesday, which will include updated economic projections as well as the new dot plot,” the article said. “Analysts are not expecting any significant policy changes as markets are starting to wonder if the U.S. could see sooner-than-expected rate hikes due to strong economic growth and rising yields.”

“How officials see the economy and rates heading over the upcoming years is crucial for investor’s decision making,” said FXTM chief market strategist Hussein Sayed.

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