It seems that a perfect storm is brewing for gold bullion, with a number of global factors aligning in recent weeks to push the price of the precious metal to all-time highs. Earlier this week, the International Monetary Fund announced that it had sold 200 tonnes of gold to the central bank of India in a $6.7 billion sale, another blow to the U.S. dollar that sent gold prices near $1,080 per ounce.
The IMF had previously announced plans to sell more than 400 tonnes of gold from its reserves (which stand at more than 3,000 tonnes) in order to raise money and increase lending to developing markets. Some analysts had worried that the strategy would flood the market for bullion, resulting in downward price pressure. But quite the opposite occurred, as India’s bold move signaled that big buyers are bullish on gold at its current level (although India paid just slightly more than $1,000 per ounce in the transaction).
China has been very vocal in recent months about its desire to diversify its reserve holdings away from the U.S. dollar, and has begun accumulating massive positions in gold to do so. China now holds more than 1,000 tonnes of gold valued at some $40 billion. Russia has also been buying up gold, adding nearly 100 tonnes over the last year to bring its total holdings to about 570 tonnes.
Headed Higher Still?
Despite the near vertical trajectory of gold prices in recent months, many analysts believe that there is still room for appreciation. A recent report from Bloomberg notes that many traders are eying the $2,000 per ounce mark, and a number of banks have raised forecasts for the upcoming year. Some investors see prices going even higher. For investors looking to gain exposure to gold prices, there are a number of ETF options (see our complete guide to gold ETFs for a more complete rundown):
- SPDR Gold Trust (GLD): The most popular ETF option for investors looking for gold exposure, GLD jumped more than 2% on Tuesday and has gained more than 40% over the last year. With a market capitalization now above $20 billion, this SPDR is one of the largest holders of gold in the world.
- ETFS Physical Swiss Gold Shares (SGOL): This ETF presents an appealing option for investors interested in diversifying their bullion holdings across different countries. SGOL stores its gold in secure vaults in Switzerland, a country known for protecting assets of investors from around the world.
- Market Vectors Gold Miners ETF (GDX): GDX is a global equity ETF, investing in stocks of gold miners from various countries. In recent months, GDX has effectively served as a leveraged investment on gold prices, often rising or falling by a multiple of the change in the spot price for gold bullion. True to form, GDX gained more nearly 8% on Tuesday, three times the daily change for GLD and SGOL.
For more actionable investment ideas, sign up for our free ETF newsletter.
Disclosure: No positions at time of writing.