Persistent inflation amid a strong economy could force the U.S. Federal Reserve to pivot from its rate-cutting agenda. Despite the erratic nature of the broad economy, gold has been holding steady.
The precious metal is up over 30% within the past year, reaching an apex just before the 2024 U.S. presidential election. Since then, gold’s gains have given way to a stronger dollar as investors anticipate that inflation could remain stubborn and sticky.
Gold could essentially be in a consolidation phase, as more economic data confirms whether inflation is here to stay. As Kitco News mentioned,“the precious metal finds itself beginning on the back foot as traders adjust their positions and evaluate the most recent economic data that may be absolutely crucial in determining the direction of Federal Reserve monetary policy.”
Amid the uncertainty, there are still other factors supporting gold, such as continued central bank buying and the addition of safe haven assets amid global conflict. Of course, if the Fed decides to continue cutting rates, a weaker dollar could support an ongoing gold rally.
“In essence, the price behaviour of gold has been evidence of its function as a safe-haven asset, surviving the storm of a rising currency and a shifting macroeconomic scene,” Kitco added.
2 Options for Gold Exposure
Investors looking to get gold exposure to diversify their portfolios could use the recent price dip as an entry point. With that, Sprott offers two options: one with a flexible, yet tangible investment experience, and one alternative play via gold mining companies.
First up is the Sprott Physical Gold Trust (PHYS ), which allows for exposure to gold prices without the logistical requirements of storing the precious metal. However, PHYS allows investors to convert their fund shares into physical bullion, offering feasibility and flexibility.
Another way to get exposure is via miners. As demand increases, ancillary services that support the industry, such as mining, can also prosper. Gold’s rally in 2024 was also made evident in mining indexes like the NYSE Arca Gold Miners Index, which was up just over 10% for the year. Additionally, the Sprott Zacks Gold Miners Index was up even higher, at almost 15%.
That said, investors can get mining exposure via the Sprott Gold Miners ETF (SGDM ). Rather than choosing individual mining stocks, the fund adds broad-based exposure to miners, thereby eschewing overconcentration in shares of single companies. PHYS offers a pure play, while 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, providing added additional country diversification.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
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
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.
