Rate cut expectations continue to add fuel to gold’s serendipitous rise this year as the precious metal pushes past the $2,600 mark. Gold is already up over 26% for the year, outpacing the S&P 500.
The probability of a rate cut is seemingly certain based on data from the CME FedWatch, but the question now is at what pace and how much of a rate cut will investors see for the remainder of the year? Either way, it’s adding more bullishness for prices to continue rising.
“The market is still expecting the Fed to cut interest rates by around 100 basis points by the end of the year, i.e. rates would have to be cut by 50 basis points at one of the two remaining meetings after September,” Commerzbank analysts said, via a CNBC report.
“It is therefore likely due to these aggressive interest rate cut expectations for the coming months that the gold price is rising,” they added.
Central bank buying was one of the early propellers of gold prices to start the year, but increasing volatility along with global geopolitical implications are pushing investors to the metal as a safe haven asset.
“Gold is our strategists’ preferred near-term long (the commodity they most expect to go up in the short term), and it’s also their preferred hedge against geopolitical and financial risks,” Goldman Sachs noted.
A Pair of Options for Gold Exposure
Investors don’t have to opt for holding the actual metal in order to get exposure. Gold funds can provide easy ingress to getting exposure, adding diversification to any portfolio.
With bullish tailwinds, consider a pair of options from Sprott: the Sprott Physical Gold Trust (PHYS) and the Sprott Gold Miners ETF (SGDM ). PHYS offers a more pure-play exposure experience, while on the other hand, SGDM is more indirect via gold miners.
For investors looking to add a more tangible investment experience, PHYS is ideal. The fund allows investors to have the option of converting their PHYS shares into physical bullion. This offers feasibility and flexibility when it comes to adding the precious metal to diversify a portfolio. Likewise, they can retain their shares of PHYS and still get exposure without having to store the physical commodity.
As mentioned, SGDM can build off gold’s demand momentum with its exposure to miners. The fund 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.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
