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FT: 4 Ways to Hold Gold as a Safe Haven Investment

FT: 4 Ways to Hold Gold as a Safe Haven Investment

By    |   Tuesday, 24 September 2019 01:44 PM

Gold’s surge to recent six-year highs has prompted savvy investors to search out ways to add the precious-metal to their investment portfolio.

Adding fuel to investors’ fire was some very optimistic price targets issued on Wall Street within the past month, Bloomberg reported.

Gold prices may rally to a record above $2,000 an ounce in the next two years, according to Citigroup Inc., which gave a laundry list of positive drivers including rising risks of a global recession and the likelihood that the Federal Reserve will reduce U.S. interest rates to zero.

“We expect spot gold prices to trade stronger for longer, possibly breaching $2,000 an ounce and posting new cyclical highs at some point in the next year or two,” analysts including Aakash Doshi said in a note received Sept. 10. That would exceed the record of $1,921.17 set in 2011.

Gold hit a six-year high this month as central banks ease policy to address the slowdown in growth amid the trade war.

The price of gold has risen by about 20 percent this year, reaching more than $1,550 an ounce this month for the first time since April 2013.

Citi’s outlook did come with caveats, including a hawkish turn from the Fed or a breakthrough in trade talks, although that’s not its base case. “A surprise trade deal coupled with a sharp upturn in global manufacturing data would probably suggest a peak for gold at the $1,550 an ounce level for this cycle.”

The Financial Times recently offered four ways to own gold:

1] Exchange-Traded Funds (ETFs) or Exchange Traded Commodities (ETCs)

"Commodity ETFs invest in a commodity—either by buying/selling the underlying commodity the ETF is meant to track, or buying/selling futures contracts on the underlying commodity, while an ETC doesn't do this directly. An ETC is a note, or debt instrument, which is underwritten by a bank for the issuer of the ETC. An ETN has this same "note" structure," Investopedia explained. The term ETC is commonly used in Europe and Australia, where the London Stock Exchange and Australian Securities Exchange provide trading products called ETCs. 

2] Buy Physical Gold

Investors can buy the real thing in the form of gold coins, which are widely available, or bullion bars, which are a bit harder to buy.

3] Invest Directly in Gold Shares

Those prepared to take on more risk could consider investing directly in shares in gold miners.

4] Gold Funds

Another option could be considering a more diversified fund of gold miners, such as BlackRock’s Gold & General fund or the JPM Natural Resources fund. Funds offer greater diversification as they invest in a portfolio of gold mining companies chosen by fund managers.

Gold climbed to its highest in nearly three-weeks on Tuesday, as calls for impeachment proceedings against U.S. President Donald Trump pushed stocks into red, with bullion getting a further boost from disappointing consumer confidence data, Reuters reported.

Spot gold rose to $1,527.40 an ounce at 2:26 p.m. EDT (1826 GMT), having hit its highest since Sept. 5 at $1,535.60. U.S. gold futures settled up 0.6% at $1,540.20.

"Over the course of trading today we have seen a combination of concerns around the negative headline, political uncertainty weighing on the stock market and in turn treasury yields come off a little bit, and gold prices being boosted as safe haven asset," said Suki Cooper, precious metals analyst at Standard Chartered Bank.

A weak U.S. consumer confidence data ratcheted up concerns about the global economy, by falling by the most in nine months in September, as the country's economic outlooks darkened in the face of the U.S.-China trade war.

"Fears of recession are growing in the Eurozone because the weakness in industry now also appears to be spilling over into the services sector," Commerzbank analysts wrote in a note.

"Gold was therefore in considerable demand as a safe haven yesterday, as reflected in high ETF (exchange-traded fund) inflows."

Holdings of SPDR Gold Trust GLD, the world's largest gold-backed ETF, jumped 1.6% to 908.52 tonnes on Monday, the highest since November 2016.

Material from Bloomberg and Reuters has been used in this report.

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Gold’s surge to recent six-year highs has prompted savvy investors to search out ways to add the precious-metal to their investment portfolio.
gold, safe, haven, investment
Tuesday, 24 September 2019 01:44 PM
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