The largest ETF backed by physical holdings of gold has more than tripled YTD returns of the S&P 500. Some investors may interpret that as meaning bullion’s upside from here could be capped. But some experts see more appreciation in store for the yellow metal.
In what could be good news for WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN ), positive sentiment is firmly in place for the precious metal. For example, on Monday. Citigroup boosted its near-term gold forecast to $3,500 per troy ounce from $3,300. It said it expects the commodity to trade in the $3,300/oz-$3,600/oz range over the next several months.
That’s up from the bank’s prior forecast of $3,100/oz-$3,500/oz. If the fresh outlook proves accurate, it could be material to ETFs like GDMN. For its part, the WisdomTree ETF’s gold upside leverage is derived from two sources. Those are futures contracts and exposure to shares of gold miners. Old-guard competing funds typically check just one of those two boxes.
Macroeconomic Picture Could Lift GDMN
With the July jobs report and recent inflation data standing as examples, investors are right to ponder the strength of the U.S. economy and evaluate appropriate hedges, such as gold.
“The market has been concerned about a U.S. recession due to high interest rates for the past three years, buying gold to hedge the downside risks. This fear has likely only increased over the past six months given President Trump’s largest-in-a-century trade tariff agenda,” noted Citi.
The disappointing jobs report, which showed gains of just 73,000 and prompted Trump to fire the leader of the Bureau of Labor Statistics (BLS), could finally compel the Federal Reserve to lower interest rates at its September meeting. That’s pertinent to investors considering gold and funds such as GDMN. That’s because bullion has historically been positively correlated to lower interest rates.
Adding to the case for GDMN is the fact that gold demand remains strong. In the second quarter, demand was boosted in large part by ETF inflows, but retail investors buying physical gold bars and coins joined the party, too, according to the World Gold Council (WGC).
Outlook for Central Bank Demand Outlook Remains Healthy
“Central banks remained a key pillar of global demand, adding 166t to global official gold reserves. Although the pace of buying moderated, the outlook for central bank demand remains healthy,” noted the WGC. “Jewellery demand volumes and value continued to diverge: y/y declines in tonnage were widespread, while spending on gold jewellery saw universal gains. Volumes were very muted, almost retreating back to 2020 pandemic levels.”
For more news, information, and analysis, visit the Modern Alpha Content Hub.
This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.
WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.
