In early October, gold was valued at around $1,820 according to Kitco. That is fairly close to its low for the calendar year. Its previous low came in late February, at $1,811.
However, since the start of the fourth quarter, the price of physical gold has skyrocketed, briefly crossing above $2,100 per ounce and reaching new all-time high levels earlier this week. Although its price has fallen back somewhat since then, the cost of gold remains elevated.
Factors Underlying Gold’s Rise
In a recently published article from Kitco, author Jim Wyckoff said the metal, “remain[s]supported by still-overall-bullish technical charts, a generally depreciating U.S. dollar on the foreign exchange market, generally falling bond yields, ongoing safe-haven demand, and notions the major central banks of the world will back off on their interest-rate-increase cycles.”
Worries over geopolitical tensions are likely contributing to the upward pressure on gold’s price. In the past, such concerns have contributed to a higher demand for assets like gold.
Many experts expect gold’s recent growth to carry into the new year. Some even predict that gold’s price will remain strong throughout 2024, with prices holding steady above $2,000/oz. That’s not an entirely unreasonable expectation. Earlier this year, the World Gold Council released a survey noting “24% of central banks intend to increase their holding reserves in the next 12 months.” Not only is that likely to provide support for current prices, it could stimulate even greater demand.
See More: “Gold’s Q4 Rally Continues, Experts Calling for an Even Better 2024“
Direct & Indirect Gold Exposure Via ETFs
ETFs holding physical gold are about as close as you can get to buying and storing gold bullion on your own. The VanEck Merk Gold Trust (OUNZ) is nearly a decade old. Like many other physical gold ETFs, it tracks the LBMA Gold Price PM Index. The fund has an expense ratio of 0.25% and assets of nearly $780 million. OUNZ is unique among other physical gold ETFs on the market for one key attribute that it offers its investors. The trait that separates it is that it allows shareholders to exchange their shares in the fund for actual gold.
OUNZ has posted a 9.22% return so far in the quarter, and a 10.46% return YTD. It currently has a nearly 10% annualized five-year return, according to LOGICLY.
Investors who may not be looking for direct exposure to the price of gold can look to funds like the VanEck Gold Miners ETF (GDX) and the VanEck Junior Gold Miners ETF (GDXJ). These funds provide indirect exposure to the precious metal by investing in domestic and foreign gold mining equities.
See More: “Gaining Global Exposure to Gold Miners“
In terms of performance, GDX posted a 13.27% return during gold’s Q4 rally, and nearly a 6.35% return YTD. Meanwhile, GDXJ posted a return of 16.07% quarter to date and 4.94% year to date, according to LOGICLY.
With economic and geopolitical uncertainty remaining high for the time being, investors may be more likely to seek out ways to protect and diversify their wealth. And gold exposure may provide just what they’re looking for.
For more news, information, and analysis, visit the Beyond Basic Beta Channel.
Originally published on ETFTrends.com on December 7, 2023.
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