Home Commodities People are asking: “How do I Play This Gold Rush?”

People are asking: “How do I Play This Gold Rush?”



For investors seeking a safe-haven from the volatile stock market as trade disputes and global growth concerns persist are chasing the latest gold rush, growth is one of the most important factors to consider

Gold prices last week topped $1,500 oz for the 1st time in 6 years, fueling gold ETFs to levels not seen since the Spring of Y 2013.

Monday, gold rose 0.9% to $1,522 oz, and some analysts think they could run higher.

Goldman Sachs (NYSE:GS) last week boosted its 3-month and 3-month gold price forecast to $1,575 and $1,600 oz, respectively.

If growth worries persist, possibly due to a trade war escalation, gold could go even higher, driven by a larger ETF gold allocation from portfolio managers who still continue to under-own gold,” Goldie said in a note to clients last Wednesday. “Gold ETFs have recently built momentum almost as strong as in 2016, and we believe that can be maintained in the short term.”

Trade dispute fears aren’t the only reason for gold’s recent out-performance.

Investors tend to flock to bond funds when they are nervous about the stock market. But global bond yields at or near record lows make gold look more attractive, since the precious Yellow metal is a Zero-yield asset. In Europe and Japan, bond yields are negative, which means lenders pay to lend borrowers money.

The rush to gold fueled global gold-backed ETFs last month to their highest marks since March 2013, according to the World Gold Council (WGC). They saw net inflows of $2.6-B across all regions, adding 52 tonnes to 2,600 tonnes.

“Last month’s flows continued the positive trend that had started in mid-May as uncertainty rose — whether from economic concerns, trade tensions or geopolitical risks — and global monetary policy started to shift to a more accommodative stance,” the World Gold Council said in its latest report. “As the gold price in USDs increased by an additional 1.3% in July, global assets under management rose 3.4% to $119-B.”

Gold purchases by global central banks have also boosted gold, as the banks seek safety amid trade disputes and geopolitical tensions.

Play This Gold Rush 4 Ways

SPDR Gold Shares (GLD), +1% Monday, is trading at its highest marks since May 2013. The $40.4-B fund is up 17% YTD, outpacing the S&P 500 by 2 percentage points. GLD, launched in November 2004, carries a 0.40% expense ratio. It has extended from a June breakout.

The $15-B iShares Gold Trust ETF (IAU), also + 17% this year, marked its 14th anniversary in January. It has also extended from a breakout in June. IAU charges a 0.25% expense ratio.

SPDR Gold MiniShares (GLDM), with $901-M in assets, launched last year. The fund charges the lowest fee for a gold ETF, at 18 bpts.

GraniteShares Gold Trust (BAR), launched in August 2017, is another low-cost fund. Its expense ratio is 0.20%. Both GLDM and BAR are up 17% and extended from any buy point.

Stay tuned…

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.