Over the weekend, President Trump announced plans to implement tariffs against Canada and Mexico. Those two countries are the biggest trading partners of the U.S.
Those headlines had the predictable impact of pressuring equities, while boosting safe havens such as the dollar and gold. Despite strength in the greenback, the yellow metal hit a record high on Monday. Cooler heads appear to be prevailing on the tariff front. But the specter of trade levies, particularly against marquee partners like Canada and Mexico, could compel investors to embrace gold and ETFs. One such fund is the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN ).
The actively managed GDMN did its job Monday, gaining 2.11% on volume that was roughly seven times the daily average. That indicates market participants are looking to bullion as avenue for dealing with tariff talk. Entering Monday, gold was up on a year-to-date basis, and there’s more to the story. That indicates GDMN could be a relevant consideration over the near to medium term.
Gold, GDMN Defying Logic
Experienced gold investors know typical headwinds for the yellow metal include a strong dollar and higher real interest rates. Those scenarios are at play today. But they haven’t stymied gold’s ascent. And that could bode well for assets such as GDMN going forward.
“Gold’s continued advance has occurred despite both the dollar and U.S. interest rates spiking higher. Since late September the dollar (DXY Index) has risen by nearly 10%, while long-term rates have climbed by almost a full percentage point. The fact that neither trend has disrupted gold’s performance speaks to the changing rationale for holding the metal, with central bank demand and U.S. deficits serving as support,” according to BlackRock.
Navigating the Tariffs Landscape
For market participants mulling gold or GDMN as a way to get through tariff tumult, the above sentiment is encouraging. However, trade angst could disappear nearly as quickly as it appeared. Fortunately, there are other fundamentals supporting gold. Those include strong demand among global central banks, including the People’s Bank of China (PBOC).
The PBOC’s gold holdings have surged over the past two years. And the central bank is now a more dedicated buyer of bullion than it is of U.S. government debt.
Geopolitical Considerations
“While much of the shift can be attributed to geopolitical considerations and concerns over U.S. sanctions, nagging questions regarding U.S. fiscal sustainability are a growing consideration, not just for the Chinese but also for domestic investors,” added BlackRock.
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