Bull vs. Bear: When Investing in Gold ETFs, Find What Glitters

Bull vs. Bear is a weekly feature where the VettaFi writers’ room takes opposite sides for a debate on controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play at either angle. For this edition of Bull vs. Bear, Karrie Gordon and Nick Peters-Golden debated the long-term investment case for gold ETFs. Have the yellow metal’s fundamentals fundamentally changed?

Karrie Gordon, staff writer, VettaFi: Hello again, Nick! It’s been some interesting times in markets lately with the failure of three regional banks on one side and mega-cap outperformance on the other. I hear in all the chaos you’ve managed to catch the gold bug and I thought it was worth chatting with you about why I think investing in gold ETFs doesn’t make sense for the long-term.

Nick Peters-Golden, staff writer, VettaFi: Hi Karrie! Yes, certainly times have been exciting. But bad news for markets can be good news for everyone’s favorite precious metal – and what’s the biggest source of bad news? Inflation, gold’s longtime harbinger.

Is Gold Still a Good Inflation Hedge?

Peters-Golden: Most investors have likely heard that gold is a good inflation play, but where does that relationship come from?

Put simply, the most powerful currency in the world, the U.S. dollar is backed by “the full faith and credit” of the U.S. government — but that currency can still be significantly devalued by inflation. Gold’s value, in comparison, is much more durable. It’s real in ways that the dollar’s value can’t match – and traditionally, while the dollar loses value as prices rise, gold tends to rise.