Gold and its related exchange traded funds (ETFs) have entered a phase in which they’re nearly universally appealing, now that the metal has broken through the psychological barrier of $1,000 per ounce. Why is gold the metal of the moment?
- The Federal Reserve opted to keep interest rates where they stand, escalating fears that inflation is lurking around the corner, ready to pounce on our portfolios and chip away at our purchasing power. For those fearing inflation, gold is an attractive hedge.
- The dollar is weakening, making gold priced in US dollars more affordable for overseas buyers. In the United States, gold is an effective hedge against an anemic dollar, as well.
CNBC Data Pages:
- Where's the US Dollar Today?
- Gold, Platinum, Silver Prices Now
- Many investors are still skeptical of the rally, fearing that it’s going to give out any day now. For them, gold is a safe haven tool.
- Many emerging markets are seeing a growing middle class, which has led to demand for gold on a variety of fronts, including investment, jewelry and industrial uses.
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Gold ETFs simplify investing in the metal. Gold funds that hold futures handle contract rolling for you, while funds that hold physical bullion take care of storing the metal for you. Gold ETFs that hold the stock of mining companies don’t typically present as much volatility as the metal itself. And, with it costing $350 to remove an ounce of gold from the ground, the $1000 spot price is very profitable. Among the gold ETFs, options include:
SPDR Gold Shares: up 12.1% year-to-date
Market Vectors Gold Miners: up 27.1% year-to-date
ETFS Gold Trust: launched Sept. 9
PowerShares DB Gold: up 10.6% year-to-date
Tom Lydon is the editor of ETF Trends and author of iMoney: Profitable ETF Strategies for Every Investor.