Gold continues to push higher, eyeing the $2,700 price mark. Even if a pullback eventually occurs, demand from countries like China and India could keep the precious metal elevated.
The precious metal’s prices are up close to 30%, surpassing the S&P 500. And more gains could be on the way as the Federal Reserve eases monetary policy. As China continues to grapple with boosting economic growth, recent stimulus measures could help prop up demand.
China’s influence has a profound effect on gold as the world’s largest consumer and producer. Furthermore, the yellow metal plays a pivotal role in its current macroeconomic agendas.
“The country’s strategic shift towards gold as a hedge against economic uncertainties and a counterbalance to the U.S. dollar has further amplified its influence on the market,” noted Oil Price.com. "Chinese investors, including the People’s Bank of China, have accumulated gold reserves, contributing to the price surge.
Likewise, India also values gold to a high degree. Its usage in the forthcoming holiday season should see an increased demand for gold.
“In India, gold holds a deep-rooted cultural and religious significance,” Oil Price.com noted. “It is considered an auspicious metal and integral to weddings, festivals, and other celebrations.” It’s also used as a safe haven investment in certain rural pockets of the country that don’t have immediate access to traditional financial institutions like banks.
There could be a push/pull effect to rising gold prices that Oil Price also mentioned. The precious metal could reach a level that puts it out of reach for consumers and thus, tamp down demand. However, India’s aforementioned seasonal festivities could buoy prices in the interim.
2 Options to Get Alternate Gold Exposure
When the demand for gold increases, miners will be a necessity. That, in effect, should prop up gold mining stocks. Sprott has a pair of options for getting alternate gold exposure via miners with the Sprott Gold Miners ETF (SGDM ) and the Sprott Junior Gold Miners ETF (SGDJ ).
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 gold companies found on Canadian and major U.S. exchanges.
Investors who are also looking to capitalize on the potential of small-caps, SGDJ tracks the Solactive Junior Gold Miners Custom Factors Index. It follows the performance of the small-cap precious metal companies, allowing for greater growth potential. Small-caps have the propensity to make amplified moves toward the upside when the broader market is trending higher, making this an ideal option for those who also want small-cap exposure.
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