A global de-risking amid Russia’s invasion of Ukraine is helping to spur a flight to safety as investors seek assets like gold. That’s perpetuating bullishness for the precious metal as well as ancillary services like gold exploration.
Gold could cross the $2,000 per ounce price level as the United States and its allies are discussing an embargo of Russian oil. This could make the U.S. Federal Reserve less hawkish, which could push down prospects of higher rates and a stronger dollar.
In turn, gold saw its price push higher. In the background is the ongoing concern of inflation, which could tamp down growth prospects for the year or, more specifically, cause an economic environment where stagflation occurs.
“Bullion extended its biggest weekly advance since July 2020 after U.S. Secretary of State Antony Blinken said on Sunday that America and its allies are discussing an embargo of Russian oil,” Bloomberg reports. “That could further reduce expectations for the Federal Reserve to aggressively hike interest rates this year to deal with what is already the highest inflation in 40 years.”
Alternate Exposure to Gold
An indirect play on higher gold prices could open up strength for the Global X Gold Explorers ETF (GOEX). The fund gives investors targeted exposure to companies whose core business operations focus on gold exploration.
Per its fund description, GOEX seeks to provide investment results that generally correspond to the price and yield performance of the Solactive Global Gold Explorers & Developers Total Return Index. The index is a free float-adjusted, liquidity-tested, and market capitalization-weighted index designed to measure broad-based equity market performance of global companies involved in gold exploration.
GOEX also gives investors diversified exposure to ancillary gold services internationally. Looking at its country breakdown (as of January 31, 2021), Canada comprises the largest exposure (51%), with Australia (19.5%) and Britain (10.4%) rounding out the top three.
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