Gold for years has been trading within a range of 1,200-1,400 USD/oz after falling from its highs of 1,900 in 2011. Widely used as a store of wealth, gold is fundamentally recommended for active managers to allocate in their portfolios.
June returned as much as 10%, making profits for many investors. Catalysts for this surge include the increased US-China trade war tensions and the Federal reserve not cutting rates during their June 18-19 meeting.
In recent news, traders expect a more than 50% chance of a 50 basis point rate cut by the Federal Reserve at its July 30-31 meeting. New York Fed President John Williams remarks prompted the sudden rise in expectations.
“When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress,” he said.
Mr Williams is considered a “dove”, in his support for preemptive rate cuts prolonging expansion. Upon hearing the news, the gold spot price rose 19.67, (+1.38%*). The 2-year Treasury note yield, a strong indication of expectations for Fed policy, fell 5.5 basis points to 1.781%.
Ray Dalio, founder of Bridgewater Associates, is one of the many well-known hedge-fund investors that have endorsed gold over the recent years. In his LinkedIn article, Dalio writes, “I believe it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. I will soon send out an explanation of why I believe that gold is an effective portfolio diversifier.”
Bridgewater Associates is one of the most profitable hedge-funds in the world. In 2018, their ‘Pure Alpha’ fund returned 14.6% and outperformed competing funds and benchmark indexes.
Getting ‘a piece of the action’
There are several ways to take advantage of recent price action in gold. The futures market is one method, currently trading on Comex up 1.5 basis points. Another method includes using ETFs. The VanEck Vectors Gold Miners ETF (GDX), +34.20%*, outperformed the S&P 500, NASDAQ, and the DOW Jones.
Among other ETFs include Eldorado Gold Corp. (EGO), which is up an impressive 147% year-to-date. Also, for a bit more leverage for 300% the performance of the Gold Miners Index the NUGT will help.
With this price action it appears that gold will be a big play in the second half of 2019.
*Prices recorded at the time this article was written