Volatility amid jittery markets is sparking additional appeal for safe haven assets like gold. And China is one of the largest consumers as its appetite for the precious metal continues.
According to Bloomberg, China’s central bank has been purchasing the metal for five straight months. That’s been helping to add more fuel to gold’s rally flame.
“In USD terms, the share of gold in China’s total official reserve assets reached a record high at 6.5%, compared to 6.0% in the previous month and 4.6% a year ago,” noted commodity analysts at BMO Capital Markets. as reported by Kitco News.
In addition to being a safe haven asset, analysts are also noting demand for the metal will continue as central banks shift away from the U.S. dollar. Furthermore, tariffs are an additional catalyst to fuel this demand.
“The U.S. dollar is no longer seen as a reliable reserve asset. Looking at the broader picture, the combination of deficit spending, tariffs, and pressures on smaller nations has fueled market uncertainty," said David Miller, portfolio manager of GOLY and chief investment officer at Catalyst Fund.
“Increased uncertainty typically leads to lower interest rates for Treasuries but also causes turbulence in equity markets,” he explained. “Recently, we’ve seen heightened volatility and a meaningful decline in equities from their highs earlier this year. This underscores a fundamental question: What can people truly trust? The answer remains a physical metal, gold, which has preserved its value for thousands of years and has never been debased, unlike every currency in history.”
3 Gold Opportunities
Retail investors may experience the investment benefits associated with gold without needing to purchase the metal itself via the Sprott Physical Gold Trust (PHYS ). For investors who prefer the tangible investment feel of the physical product, shares of PHYS are redeemable for gold.
An indirect way to attain exposure to the precious metal is via gold miners. Building a portfolio of gold mining stocks can take an abundance of market research. Furthermore, choosing individual stocks can subject investors to overconcentration risk. Two easier ways are via gold mining ETFs like the Sprott Gold Miners ETF (SGDM) and the Sprott Junior Gold Miners ETF (SGDJ)
For a diversified approach to gold miners, SGDM may be an ideal fund given its exposure to various large-cap miners. It 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, adding further diversification by investing in miners found on major Canadian and U.S. exchanges.
For Nonrisk-Adverse Investors
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.
For Investors who aren’t averse to risk and don’t mind the additional volatility that can accompany small-cap companies, SGDJ is the fund to consider. It tracks the Solactive Junior Gold Miners Custom Factors Index. This index follows the performance of the small-cap precious metal companies, allowing for greater growth potential.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
Diversification does not protect an investor from market risk and does not ensure a profit.
An investor should consider the investment objectives, risks, charges, and expenses carefully before investing. To obtain a Prospectus, which contains this and other information, contact your financial professional or call 888.622.1813. Read the Prospectus carefully before investing, which can also be found by clicking one of the links below.
Past performance is no guarantee of future results. One cannot invest directly in an index. 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, URNJ, COPP, COPJ, NIKL, SGDM and SGDJ
