The exit from gold-based ETFs last week was counterbalanced by safe haven demand amid heavy market volatility. When rates fall and the dollar declines, gold’s rally could resume.
Renewed recession fears roiled the stock market last week before eventually recovering. This may have also sparked a move to assets uncorrelated with the broad market such as precious metals or more specifically, gold.
Running contrary to this is Bullion Vault noting that, amid the volatility, investors were heading for the exits on the biggest gold ETFs. Despite this latest bout of market movements, gold is still up 19% for the year. It could see more upside once the Federal Reserve begins to loosen monetary policy.
“In the Western investment market, you’ve seen speculators trying to get ahead of a [US Fed] rate cut,” noted Joe Cavatoni, business strategist for the mining sector-owned World Gold Council. He added that traders are getting ahead of a rate cut primarily through bullish bets on gold futures and option contracts.
“But actually over the past 2 months we’ve been looking at [the] very transparent gold ETF market and seeing Dollars coming back [into gold], particularly in Europe,” Cavatoni said further.
Options for Adding Gold
The short-term price fluctuations should give way to long-term bullishness for gold. Worries over geopolitical tensions and the prospect of rate cuts should give gold enough tailwinds to move higher.
“Gold’s outlook remains stronger, but we are experiencing more and more volatility. And depending on the impact of rate cuts, if the Fed comes out and does 1/2 percent rate cut, then we anticipate a lot more rallying in the metals market,” said Alex Ebkarian, chief operating officer at Allegiance Gold in a Reuters report.
For those looking for easy ingress to gold exposure, consider using the Sprott Physical Gold Trust (PHYS ) and the Sprott Gold Miners ETF (SGDM ). PHYS offers a pure gold play, while SGDM offers indirect exposure via gold miners.
PHYS adds a more tangible gold investment experience. 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 gold exposure without having to store the physical commodity.
On the other hand, 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.
