As has been well-documented over the last several decades, there is never a shortage of “knowledgeable” people in the finance industry who are calling for gold’s imminent demise as an asset. This always seems to be a fixture in the markets, no matter how many times gold demonstrates its ability to withstand economic turmoil and offer security to investors’ holdings.
Holding physical precious metals for the long-term is always the best option for portfolio protection with gold. Nonetheless, the advent of exchange-traded funds has expanded the reach of the gold market, allowing investors who are usually only interested in stocks an avenue toward gaining exposure to gold. The undisputed king of gold ETFs is the SPDR Gold Shares (GLD), by far the largest fund of its kind.
Reigning ETF Champion
So far this year, GLD has added more assets than any other ETF, across all types of these funds. Its remarkable 18% surge over the course of 2016 is not even close to being matched by any other ETF. Nobody else is really contending for the title.
While this has not deterred the gold bears nor the gold bulls, occasional declines for GLD are in line with normal market behavior. When any asset or group of assets rallies as quickly as the various gold-backed ETFs have through the first 2-and-½ months of the year, there are going to be doubters who believe that the surge is overreaching. These periodic pullbacks are always a good chance for “buying on the dips,” or finding a good deal in the brief moments when the rally stalls.
Protection for the Long Haul
Long-term investors are concerned with securing their portfolios for many years, even decades. This stands in stark contrast to “day traders” who are only grasping at a quick buck. For the savvy investor, the short-term ups and downs are unimportant beyond offering a quick opportunity to expand one’s position in an asset at depressed prices.
Moreover, seeking safe haven is not about sweating day-to-day movements in asset prices any more than it is about putting all of one’s wealth into precious metals. This is a case of placing all of your eggs in one basket. Instead, gold is the ultimate counterbalance to potential downturns for the rest of someone’s paper assets.
Some investment advisors will tell you that this is the role played by Treasury notes and other government bonds, but gold is not simply another version of buying government debt. It is an altogether different alternative that has intrinsic value. By all means, a diversified portfolio should include both.
With all of that being said, nobody is going to deny that a rising gold price is unimportant to those holding positions in gold. With the prolonged slump for precious metals from 2012 to 2015, gold prices have created plenty of room to run higher. According to many analysts, especially those who utilize technical charts, the yellow metal looks to have a possible upside for prices in the $1,400/oz to $1,450/oz range by the end of the year. This is especially true if the global economic outlook doesn’t improve.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.