Housing prices and gold may have more in common than investors think, prompting two exchange-traded funds (ETFs) to come into focus.
Needless to say, the housing market is scorching hot. While more supply is starting to come into the market, low mortgage rates could still buoy home prices.
“Home price growth in the US has accelerated even further, reaching a new record,” a MINING.com article said. “The S&P/Case-Shiller U.S. National Home Price Index rose from 255.3 in May to 260.9 in June, boosting the annual percentage gain from 16.8% to 18.1%, as the chart below shows. That’s the largest jump since 1988 when the series began.”
In addition, “rallying home prices add to the inflationary pressure. What’s important, this year’s impressive home inflation hasn’t shown up in the CPI yet. It will, though, as increases in house prices translate into housing inflation, which lifts consumer price measures. This effect may be substantial, given that shelter represents one-third of the overall CPI and about 40% of the core CPI.”
Rising inflation sets up a play for gold. The precious metal is often used as a hedge when inflation rears its ugly head and erodes the dollar’s value.
“Well, rising home prices imply that inflation will be higher in the future than widely expected. Higher inflation could increase the demand for gold as an inflation hedge”, the article said. “It’s also the best guarantee that real interest rates will stay low, which should support gold. More persistent inflation increases the odds of stagflation, gold’s favorite macroeconomic environment.”
Two Real Assets, Two ETFs
The Invesco Active U.S. Real Estate ETF (PSR ) and the Invesco DB Gold Fund (DGL ) are two ETFs to play this gold-housing dynamic. PSR structures and selects its investments primarily from a universe of securities included within the FTSE NAREIT All Equity REITs Index at the time of purchase. The selection methodology uses quantitative and statistical metrics to identify attractively priced securities and manage risk.
Of course, when it comes to active management, the question of cost is always apparent. PSR’s expense ratio comes in just at 0.35%.
As for DGL, it seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Gold Index Excess Return™ (DBIQ Opt Yield Gold Index ER or Index) plus the interest income from the Fund’s holdings of primarily US Treasury securities and money market income less the Fund’s expenses. The Fund is designed for investors who want a cost-effective and convenient way to invest in commodity futures.
For more news and information, visit the Innovative ETFs Channel.