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Wall Street JournalRide the Gold Rush With These ETFs
Gold has been enjoying a huge rally amid Fed rate cut bets in September and large purchases by central banks. iShares Gold Trust IAU has gained 22.3% so far this year (as of Aug. 29, 2024). The potential Fed rate cut and a weak dollar and safe-haven demand.
As a result, investors who are bullish on gold right now may want to consider a near-term long on the precious metal. Fortunately, with the advent of exchange-traded funds (ETFs), there are several options in the regular and leveraged gold space to make profits.
Regular gold ETFs include SPDR Gold MiniShares Trust GLDM, abrdn Physical Gold Shares ETF SGOL, VanEck Merk Gold Trust OUNZ, Goldman Sachs Physical Gold ETF AAAU and GraniteShares Gold Trust BAR. These ETFs have gained about 20% this year.
The leveraged gold and gold mining ETFs includeProShares Ultra Gold ETF UGL, DB Gold Double Long ETN DGP, Direxion Daily Gold Miners Index Bull 2X Shares NUGT, Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG) and MicroSectors Gold Miners 3X Leveraged ETN GDXU.
Let’s delve a little deeper into the gold investing’s potential.
Why Gold ETFs Surged
Gold bullion ETF IAU recorded a monthly gain of 4.7% due to the dollar index's 2.5% decline during the same time period. This has boosted gold's appeal among international buyers. The Fed is expected to enact a rate cut in September.
There is currently a 67% probability of a 25-bp rate cut in September (at the time of writing), per CME FedWatch Tool. If The Fed eases its policy, the greenback will likely lose strength and bond yields will fall. Both factors should favor gold investing.
Limited Gold Reserves
Approximately 187,000 metric tons of gold have been mined to date, with the majority originating from countries like China, South Africa and Australia. The estimated excavatable gold reserves stand at around 57,000 tons, per a recent United States Geological Surveys.
Obtaining government permits for mining operations has become more tough, with the process often requiring an extended time frame and facing greater scrutiny. Plus, many mining projects are planned for remote areas, necessitating the construction of essential infrastructure such as roads, power and water systems. These requirements make the overall mining process more complex and time-consuming.
Geopolitical Tensions to Boost Gold’s Safe-Haven Appeal
The escalation in tensions in the Middle East and Ukraine is a plus for gold ETF investing as the yellow metal has a reputation of being a safe haven. Gold is seen as a low-risk, real asset that survives through economic cycles. With talks of global growth slowdown doing rounds and geopolitical tensions remaining in place, gold prices may gain in the coming year.
Central Banks Are Loading Up Gold
Central banks are buying gold in record numbers, and as of July 2024, they have purchased 1,037 tons of gold in 2023, which is the second-highest annual purchase in history, per moneycontrol.com. Central banks are important holders of gold, making up for about one-fifth of all gold mined throughout history.
This surge reflects efforts by some nations to diversify away from the U.S. dollar. Plus, gold is viewed as an inflation-protected asset. This could be another reason for central banks’ inclination for preserving gold.
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iShares Gold Trust (IAU): ETF Research Reports
abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports
ProShares Ultra Gold (UGL): ETF Research Reports
Direxion Daily Gold Miners Index Bull 2X Shares (NUGT): ETF Research Reports
DB Gold Double Long ETN (DGP): ETF Research Reports
Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG): ETF Research Reports