Heading into the new year, the capital markets might be positing whether gold can repeat its 2024 performance. According to Citi analysts, recent history shows that it can.
Gold doesn’t succumb to fly-by-night momentum rallies, but price trends that can sustain themselves over time. As Citi analysts data noted in the Wall Street Journal, gold futures that have risen by at least 20% tend to rise again the following year. This occurred in five of the last six years where futures averaged at least a 15% gain. The only time this didn’t occur was in 2021 where the precious metal fell 3.6% after rising 25% the previous year.
The Wall Street Journal also identified other factors that could keep it rising in the new year. These include lower interest rates, geopolitical uncertainty, a weaker dollar, and central bank buying. Furthermore, unlike other commodities, it isn’t typically affected by industrial demand events such as trade wars. For example, fears of a U.S.-China trade war shouldn’t affect it. It primarily serves as a store of value versus industrial usage like silver or platinum.
“Gold doesn’t have the industrial baggage of other commodities that could really get pulled down under this sort of trade-disruption hit,” JPMorgan’s Shearer said.
Investors looking to gain gold exposure, but want to minimize the task of storing physical gold can opt for the Sprott Physical Gold Trust (PHYS ). In addition, PHYS allows investors to convert their fund shares into physical bullion. This offers investors the feasibility and flexibility when it comes to adding the precious metal to diversify a portfolio.
A Gold Mining Option
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 LP or VettaFi.
Exchange Traded Funds (ETFs): SETM, LITP, URNM, URNJ, COPP, COPJ, NIKL, SGDM and SGDJ
