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Gold, a safe-haven investment during a challenging period, has been trending upward, encouraging calls for a surge in the commodity’s price to reach its price peak.
The price of the yellow commodity has been ascending amid rising geopolitical tensions in the Middle East, the increasing probability of an interest rate cut by the Fed and central banks increasing their purchase of the precious metal.
Rate Cut Likelihood Grows
According to Reuters, recent economic data suggesting easing labor market conditions, indicate a softening U.S. economy. This results in increased hopes that the Fed might cut interest rates in September.
With increased projections of rate cuts later in 2024, investing in gold becomes more attractive. The recent inflation data has ignited market expectations of interest rate cuts this year, with a likelihood of 66.5% that the Fed might lower the rate to 5-5.25% in September, according to the CME FedWatch Tool.
With a probability of 46% of the interest rates falling to 4.75-5% in December, the long-term treasury rates may start declining, making gold more appealing to investors compared to bonds.
Will Gold Rise on the Greenback Slide?
Gold prices are inversely related to the value of the U.S. dollar as gold is priced in dollars. A weaker U.S. dollar generally leads to higher demand for gold, pushing its price upward as it becomes more affordable for buyers holding other currencies.
If the Fed goes ahead with a rate cut, the greenback may lose its strength. As the U.S. dollar weakens toward the end of 2024 and into 2025, the price of the yellow commodity may surge further.
Other Catalysts Powering Gold's Rally
According to John Reade, Chief Market Strategist, World Gold Council, as quoted on Nomura, emerging economies are driving gold’s demand, constituting nearly 75% of the consumer demand for the metal over the previous decade.
Investors raising the allocation of the precious metal in their portfolio is also boosting demand for gold. Being one of the most financialized commodities today, with 38% of average annual net demand now driven by investment, a potential shift toward diversifying portfolios with increased investments in gold is pushing up its demand and price.
Growing demand for technology, with demand for semiconductor chips rising on an AI rally, should also boost the demand for gold.
ETFs in Focus
Across extended investment periods, gold preserves its purchasing power, outpacing inflation and contributing significant diversification to an investment portfolio due to its historical tendency to have a negative correlation with other asset classes.
Increasing chances of a rate cut, a weakening greenback and central banks ramping up their gold purchases could potentially drive investments into physically backed gold ETFs.
Below, we highlight a few funds.
SPDR Gold Shares (GLD - Free Report) has gained 14.55% over the past three months and 19.07% over the past year.
iShares Gold Trust (IAU - Free Report) has gained 14.59% over the past three months and 19.24% over the past year.
SPDR Gold MiniShares Trust (GLDM - Free Report) has gained 14.63% over the past three months and 19.42% over the past year.
abrdn Physical Gold Shares ETF (SGOL - Free Report) has gained 14.61% over the past three months and 19.34% over the past year.
Goldman Sachs Physical Gold ETF (AAAU - Free Report) has gained 14.60% over the past three months and 19.30% over the past year.
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Capitalize on Gold"s Momentum With These ETFs
Gold, a safe-haven investment during a challenging period, has been trending upward, encouraging calls for a surge in the commodity’s price to reach its price peak.
The price of the yellow commodity has been ascending amid rising geopolitical tensions in the Middle East, the increasing probability of an interest rate cut by the Fed and central banks increasing their purchase of the precious metal.
Rate Cut Likelihood Grows
According to Reuters, recent economic data suggesting easing labor market conditions, indicate a softening U.S. economy. This results in increased hopes that the Fed might cut interest rates in September.
With increased projections of rate cuts later in 2024, investing in gold becomes more attractive. The recent inflation data has ignited market expectations of interest rate cuts this year, with a likelihood of 66.5% that the Fed might lower the rate to 5-5.25% in September, according to the CME FedWatch Tool.
With a probability of 46% of the interest rates falling to 4.75-5% in December, the long-term treasury rates may start declining, making gold more appealing to investors compared to bonds.
Will Gold Rise on the Greenback Slide?
Gold prices are inversely related to the value of the U.S. dollar as gold is priced in dollars. A weaker U.S. dollar generally leads to higher demand for gold, pushing its price upward as it becomes more affordable for buyers holding other currencies.
If the Fed goes ahead with a rate cut, the greenback may lose its strength. As the U.S. dollar weakens toward the end of 2024 and into 2025, the price of the yellow commodity may surge further.
Other Catalysts Powering Gold's Rally
According to John Reade, Chief Market Strategist, World Gold Council, as quoted on Nomura, emerging economies are driving gold’s demand, constituting nearly 75% of the consumer demand for the metal over the previous decade.
Investors raising the allocation of the precious metal in their portfolio is also boosting demand for gold. Being one of the most financialized commodities today, with 38% of average annual net demand now driven by investment, a potential shift toward diversifying portfolios with increased investments in gold is pushing up its demand and price.
Growing demand for technology, with demand for semiconductor chips rising on an AI rally, should also boost the demand for gold.
ETFs in Focus
Across extended investment periods, gold preserves its purchasing power, outpacing inflation and contributing significant diversification to an investment portfolio due to its historical tendency to have a negative correlation with other asset classes.
Increasing chances of a rate cut, a weakening greenback and central banks ramping up their gold purchases could potentially drive investments into physically backed gold ETFs.
Below, we highlight a few funds.
SPDR Gold Shares (GLD - Free Report) has gained 14.55% over the past three months and 19.07% over the past year.
iShares Gold Trust (IAU - Free Report) has gained 14.59% over the past three months and 19.24% over the past year.
SPDR Gold MiniShares Trust (GLDM - Free Report) has gained 14.63% over the past three months and 19.42% over the past year.
abrdn Physical Gold Shares ETF (SGOL - Free Report) has gained 14.61% over the past three months and 19.34% over the past year.
Goldman Sachs Physical Gold ETF (AAAU - Free Report) has gained 14.60% over the past three months and 19.30% over the past year.