Gold prices continue to show upside amid a market doused with heavy volatility. According to some market analysts, gold can only continue going up from here.
Per an article in The Street, global investment firms UBS and Deutsch Bank foresee gold’s rally extending into next year. The major price drivers for this optimistic forecast relate to declining demand for U.S. Treasuries and the U.S. dollar.
On the surface, it might appear that Treasuries should be an ideal safe haven amid the recent market volatility. However, market analysts are factoring in the effect of trade wars on the attractiveness of U.S. bonds.
“Thirty percent of treasuries are held by overseas buyers who are less inclined to finance our economy amid a trade war,” The Street explained.
If the Federal Reserve resumes its interest rate-cutting path, then that could provide further downward pressure on the greenback. In turn, this helps gold’s case.
“Its (UBS) current price target is $3,500 per ounce, citing declining demand for Treasuries and the U.S. Dollar. UBS 2025 gold target is the highest among major banks,” The Street noted. It reported that “Deutsche [Bank targets] $3,700 per ounce in 2026,” which is revised $800 higher than its previous price prediction.
Golden Opportunity for Mining Exposure
If the price trajectories hold, this should favor miners. Increased prices essentially translate into higher revenue for miners, benefiting gold mining funds like the Sprott Physical Gold Trust (PHYS) and the Sprott Gold Miners ETF (SGDM ).
PHYS offers easy access to pure-play gold exposure through its fund. But it also adds a degree of flexibility by allowing investors to convert their fund shares into physical bullion. With exposure to gold via funds, investors avoid the logistics of storing gold. But they can convert their shares to bullion if they want a more tangible investment feel.
Another option for exposure is via miners. As demand for the metal rises, supportive services in the gold industry like mining can also exhibit bullishness. Rather than choosing individual mining stocks, SGDM adds broad-based exposure to miners. That eschews the overconcentration risk inherent in shares of single companies.
The Index Tied to SGDM
SGDM seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of large-cap gold companies that trade on Canadian and U.S. exchanges.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
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Past performance is no guarantee of future results. One cannot invest directly in an index.
Gold and precious metals are referred to with terms of art like store of value, safe haven and safe asset. These terms should not be construed to guarantee any form of investment safety. While “safe” assets like gold, Treasuries, money market funds and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.
Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
Sprott Asset Management USA, Inc. is the Investment Adviser to the ETFs. ALPS Distributors, Inc. is the Distributor for the ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc. or VettaFi.
Exchange Traded Funds (ETFs): SETM, LITP, URNM, URN, COPP, COPJ, NIKL, SGDM and SGDJ.
