Gold market performance
On August 20th, the gold price climbed to a new historical high again, with spot gold once rising to $2,531 per ounce which breaks the $2,500 key level. Since the beginning of 2024, gold has risen by more than 21%, constantly setting new historical highs. This year, gold is undoubtedly one of the best-performing assets.
Reasons why gold has long-term investment value
US economic recession fear
The U.S. unemployment rate rose to 4.3% in July, triggering the "Sahm Rule", which has sparked concerns on Wall Street and among global investors about the beginning of an economic recession in the United States. In the face of economic uncertainty, gold is typically seen as a safe-haven asset.
The Federal Reserve's expectation of an interest rate cut is gradually increasing
Expectations for a Federal Reserve rate cut in September have strengthened. If the Federal Reserve enters a rate-cutting cycle, it could lead to a weaker U.S. dollar. Since gold is priced in U.S. dollars, a weaker dollar means gold becomes cheaper for those holding other currencies, which may stimulate demand for gold.
Geopolitical risks
As conflicts between Palestine and Israel, and between Russia and Ukraine continue to escalate, the risks faced by the global continue increase, and the desire for safety rises. Global assets are seeking more stable investments, and gold is one of the stable assets that resist risk.
Central banks around the world increase gold reserves
Central banks around the world are increasing their gold reserves to diversify their asset allocation and reduce dependence on the dollar. They also use it as a means to stabilize exchange rates.
Analyst forecast
Goldman Sachs analyst Nicholas Snowdon expects the gold price to rise to $2,700 per ounce by the end of this year, while Bank of America commodity strategist Michael Widmer predicts that the gold price will increase to $3,000 per ounce by 2025. UBS forecasts that the gold price will eventually rise to $4,000 per ounce. Based on the analysts' predictions, there is still an 8% to 60% upside potential for gold prices in the future.
Ways to invest in gold
The first thought is to buy physical gold, like gold bars, ingots, or coins. But with a variety of investment goals and needs, many people choose to invest in gold in other ways, such as gold-related stocks and gold ETFs.
>>Learn more in this article：Exploring Gold ETF and Selection Tips
Gold-related stocks: $Barrick Gold (GOLD.US)$ , $Newmont (NEM.US)$ , $Gold Fields (GFI.US)$ , $Agnico Eagle (AEM.US)$ , $Franco-Nevada (FNV.US)$ .
Gold ETFs: $SPDR Gold ETF (GLD.US)$ , $Gold Trust Ishares (IAU.US)$ , $Spdr Gold Minishares Trust (GLDM.US)$ .
Gold Miner ETFs: $VanEck Gold Miners Equity ETF (GDX.US)$ , $VanEck Junior Gold Miners ETF (GDXJ.US)$ , $Direxion Daily Gold Miners Index Bull 2X Shares (NUGT.US)$ .
Here we would like to mainly introduce top-picks of gold-related ETFs.
$SPDR Gold ETF (GLD.US)$ is the world's largest gold ETF, launched in 2004 on the New York Stock Exchange by SPDR State Street Global Advisors. It's the first ETF globally to invest in physical gold, tracking the spot price of gold with gold as its underlying asset. The gold holdings amount to 845.19 metric tons, and it buys or sells the corresponding amount of physical gold daily based on the ETF's net asset value. With an asset size of $69.7 billion, a fee rate of 0.4%, and a price of $232, it has seen a 21.4% increase year-to-date as of August 22.
$Spdr Gold Minishares Trust (GLDM.US)$ was issued by SPDR State Street Global Advisors in 2018, with a smaller asset size of $8.6 billion currently, a fee rate of 0.1%, and a price of $49. As of August 22, it has seen a 21.6% increase year-to-date. Although it shares the same issuer as GLD, there's a significant difference in market capitalisation, with GLDM having a smaller market cap and cheaper management fees. Investors should take note when choosing between the two. Generally, the larger the ETF's market cap, the more active the trading and the smaller the bid-ask spread. For those planning to hold ETFs long-term, fees is an important consideration, but for frequent traders, the impact of the bid-ask spread is greater. You can compare based on your investment goals and risk tolerance.
$Gold Trust Ishares (IAU.US)$ is also an ETF that holds physical gold and tracks the spot price of gold. Issued by iShares in 2005, it has an asset size of $29.6 billion, a fee rate of 0.25%, and a price of $47. As of August 22, it has seen a 21.6% increase year-to-date.
