ETF 360: Aberdeen Goes Deep on Gold, Commodities

Conventional narrative is that amid market uncertainty, gold is seeing strong performance and rising prices, hitting over $3,500/oz. But Minter thinks the story is more complicated than that, tracking it all back to September 11, 2001. “President Bush used special powers given to him by congress to go after terrorist funding money. That blocked people from using the U.S. dollar trading system for settling some trades.” Using the U.S. dollar to enforce policy has been happening for the last 25 years, with President Biden recently deploying it to go after Russia in the aftermath of the start of the invasion of Ukraine.

“Emerging market banks got the plot,” Minter added, and they have been adding ot their gold reserves. “Last three years, central banks brought over a thousand tons of gold.” Minter said that a lot of gold’s resilience has been in the works for years, and the precious metal would still see favorable tailwinds even without the market uncertainty of Trump’s tariff policy. “Tying it to Trump is a little off.” Minter noted that prices have been rising for awhile, but many ETF investors hold the same amount of gold they did prior to COVID.

Gold doesn’t have to be directly purchased; it can also be invested in, through gold mining companies. “The mining company equities are theoretically a leveraged bet on the price of gold,” Minter said. Pulling gold from the ground costs roughly $1,500 an ounce, but with prices north of $3,500, the margin is record breaking. 

That said, Minter was careful to note that gold and gold miners are “two different things, even though you can see them in the same neighborhood.” Indeed, a gold mining company might have to deal with protests, labor shortages, or mismanagement that could be bad for its bottom line, even as the gold price surges.

Chang noted that the dollar has been spiraling. She asked Minter if he thought this was the end of the U.S. dollar as we know it. Minter replied, “Is this a clickbait-y question? The answer is no.” The pound and the franc both had their moment in the sun as the standard global currency, and both fell to the wayside after decades of dominance. Minter thinks the same thing could be happening to the U.S. dollar.

Commodities have been overlooked for some time, excluding things like oil and now gold. Minter thinks there could be a case for industrial metals and silver as “turning point” asset if things start to settle down and get more toward normal.

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