Equities — particularly those of the AI variety — are garnering most of the headlines and praise this year. But gold is putting together an impressive showing in its own right. And that’s lifting an array of bullion-backed ETFs.
As of June 18, the VanEck Merck Gold Trust (OUNZ) is higher by nearly 13% since the start of 2024. Importantly, that rally is rooted in credible fundamentals that extend beyond expectations that the Federal Reserve will eventually lower interest rates. In fact, the 2024 showings of OUNZ and its peers are all the more impressive when considering the Fed hasn’t lowered rates.
Among the fundamental tailwinds benefiting gold and ETFs such as OUNZ is a point for RIAs to consider. Many retail investors, including clients of advisors, are increasingly interested in the yellow metal. They want exposure to the yellow metal.
OUNZ Can Shine in Second Half
As noted above, OUNZ and its peers could be propelled higher by investors’ increasing interest in bullion. That scenario is playing out in real time.
“Their decision-making process to invest in gold is not merely based on its historical significance, but on several current and compelling factors that could collectively signal a steady rise in its price over the long term,” noted deVere Group CEO Nigel Green. “These factors are deeply interlinked and could reinforce the rationale for gold as part of a resilient investment strategy.”
Another reason that OUNZ could be appealing to advisors and investors going forward is that gold has credible diversification properties. The yellow metal’s low correlations to stocks and bonds are potentially appealing at a time when a small number of stocks are driving the broader market higher and as aggregate fixed income strategies languish.
Naysayers might assert there’s only so much retail investors can do to positively affect gold prices. However, the demand scenario for gold is buoyed by larger market participants, including global central banks. That’s constructive for ETFs such as OUNZ.
“The long-term value of gold, its robust performance during crises, and its effectiveness as a portfolio diversifier appear to be the main reasons given by these central banks for this pivot,” added Green. “Emerging market central banks have historically held gold for similar reasons, especially since the 2008 financial crash. Now it seems richer countries are, too, increasingly adopting the same strategy. China’s continuous gold buying spree is a clear indicator of its strategic move to diversify its reserves.”
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