ETFs
Take Advantage of Gold’s Momentum with These ETFs
Gold, a safe haven during difficult times, is on an upward trend, encouraging calls for the commodity to rise to its peak price.
The price of the yellow metal is rising amid rising geopolitical tensions in the Middle East, increasing likelihood of an interest rate cut by the Fed and increased purchases of the precious metal by central banks.
The probability of a rate cut increases
Recent economic data, which suggest an improvement in labor market conditions, point to a slowdown in the U.S. economy, boosting hopes of an interest rate cut by the Fed in September, according to Reuters.
With projections of deeper rate cuts later in 2024, investing in gold is becoming more attractive. Recent inflation data has revived market expectations for interest rate cuts this year, with a 66.5% chance that the Fed will cut the rate to 5-5.25% in September, according to the CME FedWatch tool.
With a 46% chance of interest rates falling to 4.75-5% in December, long-term Treasury rates could start to fall, making gold more attractive to investors relative to bonds.
Will Gold Rise Due to Falling Dollar?
The price of gold is inversely proportional to the value of the US dollar, as gold is priced in dollars. A weaker US dollar generally leads to an increase in demand for gold, pushing its price up as it becomes more affordable for buyers holding other currencies.
If the Fed decides to cut rates, the greenback could lose some of its strength. As the US dollar weakens towards the end of 2024 and into 2025, the price of the yellow currency could rise further.
Other catalysts behind the rise in the price of gold
Emerging economies are driving demand for gold, accounting for nearly 75% of consumer demand for the metal over the past decade, according to John Reade, chief market strategist at the World Gold Council, quoted by Nomura.
Investors increasing the share of the precious metal in their portfolios are also boosting demand for gold. With gold being one of the most financialized commodities today, with 38% of average annual net demand driven by investment, a potential shift towards portfolio diversification with increased investment in gold is driving up its demand and price.
Growing demand for technology, with demand for semiconductor chips rising thanks to the AI recovery, is also expected to boost demand for gold.
Focus on ETFs
Over long investment periods, gold preserves its purchasing power, outperforming inflation and contributing to significant diversification of an investment portfolio due to its historical tendency to have a negative correlation with other asset classes.
The story continues
The increasing chances of a rate cut, a weakening dollar and increased gold purchases by central banks could potentially lead to investments in gold ETFs backed by physical assets.
Below we highlight some funds.
SPDR Gold Shares (GLD) has gained 14.55% over the past three months and 19.07% over the past year.
iShares Gold Trust (UAI) has gained 14.59% over the past three months and 19.24% over the past year.
SPDR Gold MiniShares Trust (GLDM) has gained 14.63% over the past three months and 19.42% over the past year.
abrdn Physical Gold Stock ETF (SGOL) has gained 14.61% over the past three months and 19.34% over the past year.
Goldman Sachs ETF on physical gold (AAAU) has gained 14.60% over the past three months and 19.30% over the past year.
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
abrdn Physical Gold Stock ETF (SGOL): ETF Research Reports
SPDR Gold MiniShares Trust (GLDM): ETF Research Reports
Goldman Sachs Physical Gold ETF (AAAU): ETF Research Reports