Investors Reap Portfolio Benefits of Gold Amid Tariff Threats
Tariff threats continue to remain as a market wild card, but that’s feeding into more demand for gold. Investors are reaping the benefits of gold as a portfolio diversifier and hedge against market uncertainty.“We continue to see gold as an effective portfolio hedge and diversifier,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. She noted UBS raised its projection for gold’s price “as we believe the metal will continue to be supported amid fragile risk sentiment and strong demand.”
The Federal Reserve’s interest rate policy should also continue to move gold toward bullishness. It paused on rate cuts in its last meeting. But it could resume its cutting strategy should the economy show signs of softening.Sparking Additional Demand“In addition to tariff uncertainty and geopolitical tensions, further rate reductions from the Federal Reserve later this year should also boost the investment case for gold," UBS’ Marcelli said.
In addition, China’s consumption will also sway the price of gold. As the largest consumer of the precious metal, the country recently "approved that 10 insurance firms":https://finance.yahoo.com/news/china-frees-possible-27-billion-054250990.html can buy gold, which should spark additional demand.
“China’s green light for insurers will supercharge demand,” said Nigel Green, CEO of global financial advisory deVere Group.2 Gold Options for ExposureSprott has a few ways to attain gold exposure, allowing investors to realize the benefits of portfolio diversification and hedging against market uncertainty with assets uncorrelated to the broader stock market. One way is through the Sprott Physical Gold Trust (PHYS), while the other is a play on miners with the Sprott Gold Miners ETF (SGDM B-).
PHYS offers easy access to gold exposure through its fund, but also adds some degree of flexibility by allowing investors to convert their fund shares into physical bullion. In fund form, investors avoid the logistics of storing gold, but can always convert their shares to bullion if they want a more tangible investment feel.Ancillary Services Can Exhibit BullishnessAnother way of getting gold exposure is via exposure to miners. As demand for gold rises, ancillary services that support the industry like mining can also exhibit bullishness. Rather than choosing individual mining stocks, the fund adds broad-based exposure to miners. That eschews the overconcentration risk inherent in shares of single companies. PHYS offers a pure play. And SGDM seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of large-cap gold companies that trade on Canadian and U.S. exchanges.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
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