A retreating dollar is exactly what gold needed to put the precious metal back into the investment spotlight. Hotter-than-expected inflation in January pushed the yellow metal below the $2,000 mark. But it has been rising again with geopolitical factors providing tailwinds along with a weaker greenback.
Tensions in the Middle East could push investors back into the metal as part of a scramble for safe haven assets. In parts of the world, recessionary pressure could feed into higher the precious metal’s prices.
“We also have lingering geopolitical instability, which favours the safe-haven gold, and also uncertainty about the economic outlook, with Japan and the UK both now in technical recession … alongside China,” said Ricardo Evangelista, senior analyst at ActivTrades.
In the interim, all eyes remain on the U.S. Federal Reserve and what it will do with interest rates. The central bank has been holding steady, waiting for economic data to substantiate rate cuts. Once that happens, it could open the floodgates for more gains for the yellow metal.
“Any signs of economic weakness could spark hope that rate cuts could be on the way, which may assist gold,” said Tim Waterer, chief market analyst at KCM Trade.
Get Gold Exposure 3 Ways
Prospective investors looking to add the metal to their portfolios can certainly opt for gold bars or coins. However, the yellow metal’s funds offer investors another option to get bullish on rising prices without worrying about storage logistics.
One way is the Sprott Physical Gold Trust (PHYS). The fund provides an enhanced physical bullion structure, and offers the ease of purchase and sale that comes with being traded on a stock market exchange. Shares are redeemable for the precious metal bullion if the investor wants to retain the option of having a more tangible investment.
Another way is via equities or more specifically, gold miners. For a large-cap focus, there’s the Sprott Gold Miners ETF (SGDM). The ETF seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of larger-sized mining companies on Canadian and major U.S. exchanges.
An alternative to SGDM is a focus on small-caps for more growth-oriented opportunities like the Sprott Junior Gold Miners ETF (SGDJ). The fund tracks the Solactive Junior Gold Miners Custom Factors Index, which follows the performance of the small-cap precious metal companies. When large-cap equities move toward the upside, small-caps tend to follow with amplified moves, albeit with more volatility in a downturn.
For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.
Originally published on ETFTrends.com on February 26, 2024.
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