Reasserting the Case for Gold as It Hits All-Time Highs | ETF Trends

We have been bullish on gold since last summer, and the case for investing in gold has not been this compelling in years. Gold prices have reached all-time highs in recent days, surpassing the previous high set in September 2011, and current price trends suggest a longer, sustained rally in gold, similar to the 2001-2008 secular rally.

The persistence of negative real rates and supply and demand dynamics appear in favor of the metal moving forward. Gold continues to be a scarce commodity, and the fact that there have been no significant new gold discoveries since 2016 only adds to its supply pressure. Demand for gold, however, has continued to rise as investors have sought exposure and central banks have added to their gold reserves.

Investors have long been attracted to gold’s many potential benefits. It has historically improved portfolio diversification, acted as an inflation hedge, and proven a safe haven asset in times of market uncertainty. But some may be surprised by its impressive total return since the turn of the century, proving gold’s appreciation potential.

Gold Outperformance (1/1/2000 – 6/30/2020)

Source: Morningstar. US Stocks represented by S&P 500 Index; US Bonds represented by Bloomberg Barclays US Aggregate Bond Index; Gold Bullion represented by LBMA PM Gold Price; US Treasuries represented by the Bloomberg Barclays US 1-3 Year Treasury Bond Index. Past performance is not indicative of future results. Indices are not securities in which investments can be made. An index’s performance is not illustrative of a fund’s performance.

Investors can consider both a physical gold bullion investment as well as exposure to gold via companies that search for and extract gold from the ground, or gold miners. Both are affected by changes in the price of gold but offer different risk/reward profiles. Gold bullion has displayed a lower volatility profile historically and forms the basis for the price of gold. Gold miners, while a historically more volatile investment offering greater upside and downside, have reemerged from a period of management turnover and fiscal/corporate restructuring and are now better positioned to return value to shareholders in our view.

Read VanEck’s Investment Case for Gold to learn more about the current gold bull market and how to position a portfolio for it.

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The S&P 500® Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright© 2020 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

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Gold Bullion or LBMA Gold Price is the London Bullion Market Association measure of gold price quoted in U.S dollars. S&P 500® Index (S&P 500) consists of 500 widely held common stocks, covering four broad sectors (industrials, utilities, financial and transportation). Bloomberg Barclays US Treasury Index measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury. Bloomberg Barclays US 1-3 Year Treasury Bond Index measures public obligations of the U.S. Treasury with a maturity between 1 and up to (but not including) 3 years.

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