The holiday season not only presents an opportunity to spend time with loved ones, it may also be a time for investors to reallocate their portfolios, seeking to capture short-term upside potential. One of those allocations could be to gold.
Quantitative analysis website Quantpedia noted the seasonality of gold exposure this time of year. Because gold is an asset uncorrelated with the broader market, it can exhibit patterns that don’t generally coincide with the overall stock market. Furthermore, the precious metal can be subject to its own intrinsic patterns, which include holiday influences. Quantpedia looked at how cultural holidays correlate with gold demand, and the results indeed show a connection.
Outside of the holidays, the fundamental demand drivers for gold remain. The second rate cut of the year in October further intensified the “debasement trade,” highlighting the ongoing movement away from fiat currencies like the dollar and into other assets like gold. In a recent Sprott Precious Metals Report, market strategist Paul Wong noted that gold achieved new highs as “investors rotate toward hard assets to preserve purchasing power and hedge systemic and geopolitical risks.”
“This shift is not isolated to any single region—the U.S., Europe, Japan, and other developed economies are experiencing similar fiscal and monetary pressures,” Wong added.
2 Paths for Gold Exposure
Rather than purchase gold bullion, Sprott offers various paths to exposure via their precious metals funds. Two for gold specifically are the Sprott Physical Gold Trust (PHYS) and the Sprott Gold Miners ETF (SGDM).
Those looking to mimic gold bullion exposure without the storage hassles, might look to PHYS. The fund offers access to pure-play gold exposure, but adds a degree of flexibility by allowing investors to convert their fund shares into physical bullion. Additionally, investors can convert their shares to bullion if they want a more tangible investment feel.
Gold miners are another path to exposure albeit indirectly. As demand for the metal rises, supportive services in the gold industry such as mining could also exhibit upside potential. As opposed to building a portfolio of gold mining stocks or over-concentrating in one name, SGDM adds broad-based exposure through the structural benefits of an ETF like trading flexibility, cost-effectiveness, and tax efficiency.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Content Hub.
The Sprott Physical Gold Trust is generally exposed to multiple risks that have been both identified and described in the Prospectus. Please refer to the Prospectus for a description of these risks. This material must be preceded or accompanied by a prospectus. For an additional copy of the prospectus please visit https://sprott.com/investment-strategies/physical-bullion-trusts/gold/.
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.
A bull market is one in prices are rising and investor sentiment is generally positive.
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, URN, COPP, COPJ, NIKL, SGDM, SGDJ, SLVR, GBUG, METL
Physical Bullion Funds: PHYS, PSLV, CEF, and SPPP.
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.
Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon, and their particular needs.
