Gold is considered a safe and lucrative investment because it can be used as a hedge against inflation and currency fluctuation. Given the uncertainties surrounding the economy, gold prices are rising steadily. Thus, this could be the right time to invest in the leading gold ETF SPDR Gold MiniShares Trust (GLDM), which can cushion your portfolio against enhanced market volatility.
Gold has been on an unstoppable run in recent weeks, with various factors at play pushing its prices close to an all-time high of $2074.88. One of the most significant catalysts for gold this year has been the outlook for interest rates. The Fed has been raising rates for over a year in its ongoing fight against inflation.
While the latest CPI report suggests that the Fed is progressing in getting inflation under control, there are growing anticipations of another interest-rate increase in May. The yellow metal is considered a ‘safe haven’ if increasing interest rates trigger a potential recession and weigh on corporate earnings.
Furthermore, bond yields have an opposite relationship with gold. With the two-year U.S. Treasury yield currently down from its peak of 5.1%, gold prices are typically going up. Also, the negative correlation between gold and the U.S. dollar has held up so far in 2023. A weaker U.S. dollar will likely increase the price of gold through rising demand.
On Thursday, gold prices hit their highest level of the year as the most actively traded gold-futures contract rose to $2,055.30 per troy ounce, driven by investors’ bets that inflation will remain sticky despite recent declines.
According to Bank of America analyst Lawson Winder, a weaker U.S. dollar could drive gold prices higher by the end of this year. According to him, “BofA is bullish on gold in 2023E, forecasting an annual average price of $2,009/oz. We think there could be a consolidation period in the coming months before the yellow metal resumes its ascent to a new all-time high.”
Moreover, analysts at Citi expect prices of gold to “grind higher” and increased their 2023 average gold price forecast by 7.9% to $2,050 an ounce. Also, CMC Markets recently said that a Fed pivot could trigger a sell-off in the U.S. dollar and plunge bond yields, sending the price of gold up to a $2,500-$2,600 a troy ounce range.
Here are the factors that could influence GLDM’s performance in the near term:
Robust Fund Stats
GLDM tracks the LBMA Gold PM Price Index. It has assets under management of $6.42 billion. Its expense ratio of 0.10% compares to the category average of 0.47%. The fund had net inflows of $348.53 million over the past three months and $635.46 million over the past six months. Also, its net inflows were $633.37 million over the past year.
Low Volatility
GLDM has a beta of 0.15, indicating extremely low volatility compared to the broader market.
Impressive Price Performance
GLDM has gained 5.5% over the past month and 21.9% over the past six months to close the last trading session at $39.79. The fund had a NAV of $40.08 as of April 14, 2023.
POWR Ratings Reflect Promising Prospects
GLDM’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GLDM has an A grade for Trade and Buy & Hold and a B for Peer. In the B-rated 38-ETF Precious Metals ETFs group, it is ranked #4.
Click here to see the POWR Ratings for GLDM.
View all the top ETFs in the Precious Metals ETFs group here.
Bottom Line
Gold has been on a tear lately, with various catalysts, including economic uncertainty, a weaker dollar, and still-elevated inflation, pushing gold prices close to historical highs.
As gold prices rise, investors increasingly invest in gold exchange-traded funds for solid returns. Given its impressive fund statistics and high stability, GLDM could be an ideal buy to hedge against potential market volatility.
How Does SPDR Gold MiniShares Trust (GLDM) Stack up Against Its Peers?
While GLDM has an overall POWR Rating of A, one might consider looking at its peers with an A (Strong Buy) rating: iShares Gold Trust (IAU), Aberdeen Standard Physical Gold Shares ETF (SGOL), and iShares Gold Trust Micro (IAUM).
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GLDM shares were trading at $39.55 per share on Monday afternoon, down $0.24 (-0.60%). Year-to-date, GLDM has gained 9.28%, versus a 8.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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