3 Reasons To Buy Gold ETFs Now
Zacks Investment Research | Aug 14, 2017 11:15PM ET
Gold prices are glittering again thanks to a subdued greenback and political uncertainty. The largest gold ETF SPDR Gold Shares (HK:2840) (V:GLD) has gained about 12% in the year-to-date frame (as of August 11, 2017) and was up about 5.8% in the last one month.
Now the metal’s futures for December delivery is on its course of hitting $1,300 an ounce again – the highest close Will Gold ETFs Shine in August? ).
Trump-Kim Jong-un Tensions
President Donald Trump’s recent incendiary rhetoric on North Korea’s nuclear threat halted the market rally last week. Notably, the CBOE Volatility Index jumped the most in five weeks on August 8. The S&P 500 fell the most in Time to Short U.S. Equities with ETFs? )
Since gold is often viewed as a safe haven asset and hedge against market turmoil, this Trump- north Korea’s Kim Jong-un clash gave the yellow metal a chance to soar higher. Amid rising volatility, the world's largest hedge fund – Bridgewater – suggested to put about 5% to 10% of total assets in gold as a hedge.
Subdued U.S. Inflation
U.S. consumer prices rose 1.7% year over year in July 2017, falling shy of market expectations of 1.8% and following a 1.6% gain in June. This estimate miss made one thing sure that the Fed will not be in hurry to enact its third rate hike this year.
Following the missing of the inflation data, CME’s FedWatch showed that the odds of a rate hike in December fell to UUP retreated over 2.6% in the last one month (as of August 11, 2017). Since the greenback and commodities like goldare inversely related, the metal got its great days back again.
Upcoming Festive Season in India
As per an article published on Two-thirds of India's gold demand originates from rural areas, where jewelry is traditionally seen a store of wealth.
India is a key consumer of gold. Thus, retail demand in the two top gold consuming countries China and India often drive the metal’s prices. With the forthcoming wedding and festival season in India, gold prices will have another reason to run.
Dhanteras, the first day of the famous Indian festival Diwali, is in mid-October this year. The occasion is marked by huge gold purchases. All these reasons are leading jewelers to stock the metal.
In the first seven months of the 2017, Indian imports more than doubled to 550 tons from the year-ago period in apprehension of the new tax law GST. Under the GST norm, taxes on gold increased to 3% from 1.2% previously.
To beat GST, Indian consumers also looked to India to Unify Tax: Near-Term Pain/Long-Term Gain for ETFs ).
Bottom Line
As of now, the metal seems due for a rally, So, investors intending to profit out of the new-found optimism in the gold space may consider gold ETFs like GLD (NYSE:GLD), iShares Gold Trust (AX:IAU) and ETFS Physical Swiss Gold SGOL .
Get The News You Want
For fatter returns, investors can also play leveraged products like VelocityShares 3x Long Gold ETN (V:GLD) , DB Gold Double Long ETN (BS:DGP) and ProShares Ultra Gold UGL . However, leveraged ETF plays involve greater risk.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.