While gold couldn’t avoid the turmoil that surrounded financial markets earlier this month, though its losses were likely also the result of a combination of short-covering and concerns about industrial metal demand amid the coronavirus contagion, the shiny metals has now risen once again.
Gold started the year fiercely, but after being hammered in mid-March, dropping from the mid-high $1600’s to around $1450 per ounce, it has almost fully recovered and seems ready to knock-out new highs above $1,700, benefitting from a negative real-interest-rate environment as inflation continues to outpace interest rates, say analysts.
With interest rates near zero after successive emergency rate cuts by the Federal Reserve over concerns that the coronavirus contagion will pose a dire threat to the economy, gold has now become one of the few options many see investors see for asset appreciation.
“Gold is attracting more volume from existing gold investors—[But] times like these also always bring new people in,” Kevin Rich of The Perth Mint global gold market advisor told Kitco News on Wednesday.
While many investors may be concerned that the rally is already over and there is not much more upside for the lustrous metal, Rich and others believe this is not the case.
“Some investors might say: ‘I am late to the party and should have bought gold six months ago.’ But experienced investors know that these cycles come and go. It reinforces the safe haven and diversification benefits that savvy gold investors have seen over the years,” Rich said.
Fortunate, gold is also available in a variety of options such as bars and coins, and according to gold.org, “The best estimates currently available suggest that around 190,040 tonnes of gold has been mined throughout history, of which around two-thirds has been mined since 1950. And since gold is virtually indestructible, this means that almost all of this metal is still around in one form or another. If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure around 21 metres on each side.”
“For now, there is enough [gold]to go around,” he said. “Plenty of gold in different formats available.”
The massive worldwide demand for physical gold can also be seen through The Perth Mint’s own business. In March, the mint’s depository business topped $5 billion in value of the precious metals it has sold and is holding for people.
“That’s a record level for them. They are seeing strong demand from investors. A lot of it is coming from Europe, especially Germany. There is demand from U.S. as well,” Rich said.
For ETF investors looking at getting on the gold train, the SPDR Gold Shares (GLD) and the SPDR Gold MiniShares (GLDM) are solid choices. Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
Traders looking for leverage can use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
For more market trends, visit ETF Trends.