While gold markets were a bit more tepid after a robust January, falling off as stocks attempted a rally off of the worst weekly losses since the financial crisis, the shiny metal has had a resurgence over the last week, and some analysts see this as just the beginning, giving commodities and ETF metal investors a reason to celebrate.
Gold prices struggled to climb higher following Federal Reserve’s emergency 50-basis-point cut, but according to one market analyst, if history is any indication, the precious metal has plenty of upside potential.
Ryan Giannotto, director of research at GraniteShares, told Kitco that after the last time the Federal Reserve announced a 50-basis-point inter-meeting rate cut, back in 2008, gold prices commenced a significant bull run, climbing over 17% that year. This, of course, coincided with the stock market plummeting.
“We have seen seven emergency cuts before, and gold has rallied on 26% on average during the first two years follow each of those events,” he said. “It would be very unwise to rule out a move to $2,000 by the end of the year.”
Get Ready To Run With Gold
With the massive panic surrounding the coronavirus, a 10-year Treasury note yield at all-time lows, and generalized economic and political uncertainty with an election year, gold is ripe for a run say experts.
Giannotto noted that with the 10-year yield falling below 1.0%, there is a strong argument to be made that bonds simply can’t offer the security they once did. He noted that the traditional concept of a 60/40 balanced portfolio, with 60% weighted in stocks and 40% weighed in bonds, is also no longer relevant.
“Last year, you could have sold all your bonds, put that money into gold, and you would have seen better risk-adjusted returns in your portfolio,” he said. “We have to stop seeing gold as a mythical investment and look at it as a mathematical asset.”
This is good news for gold bugs, who have seen their portfolio’s climb higher this year, as ETFs have followed suit. The GraniteShares Gold Trust (BAR) and the iShares Gold Trust (IAU) are both up over 20% in the last year. Meanwhile, for investors with a bit more risk appetite, the VelocityShares 3x Long Gold ETN (UGLD) is up 5.4% just today.
Traders looking for leverage can also use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
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