The new gold play as investors
- Gold has hit a string of record highs this year as investors looked to hedge concerns around uncertainty and volatility.
- That’s led to continued high inflows into gold ETFs, which present many investors with an easier path to diversify their portfolios through exposure to the spot price of the precious metal.
- With market watchers expecting gold to continue to rally, ETF experts see big opportunities ahead for gold ETFs.
Gold has long been viewed as a safe-haven investment, and money has typically flowed into the asset as a hedge during uncertainty and volatility.
This year, the tailwinds around tariffs and inflation have pushed the precious metal to a string of record highs. It’s also helped to bolster the growing number of gold-focused ETFs, which can offer the same hedge and protection more easily within a portfolio.
“We are seeing unprecedented levels in terms of interest for the gold market, in particular gold-backed exchange-traded funds,” Joe Cavatoni, World Gold Council managing director, told CNBC’s Leslie Picker on a recent edition of CNBC’s
Cavatoni said that growth has come from the U.S. — where the World Gold Council is tracking record inflows from American investors — as well as globally, especially from Asia.The new gold play as investors “While people are comfortably continuing to stay risk on, I think they’re really starting to get a very significant appreciation for how you need to hedge that, and gold fits that bill perfectly,” he said.
That could lead more investors to dip their toes into gold ETFs, especially as it provides investors an easier way to get in on the trade and diversify their portfolio.
Mike Akins, founding partner of ETF Action, told CNBC that while the inflows into gold ETFs have been “staggering, especially compared to the last several years,” if you look at those holdings compared to S&P 500-focused ETFs, “people are less hedged as a percentage of the equity market than they were 10 years ago, even though those flows are coming in.”
“There’s probably a lot of room for more allocation into gold ETFs if you’re thinking about it as a percentage allocation hedge to your overall portfolio,” Akins said.
Cavatoni said that looking at the various investment options into gold, gold-focused ETFs are a smaller component of that trade, but he noted that you shouldn’t “lose sight of the fact that gold trades over the counter and physical gold ownership, which we’re seeing in the investment landscape, are continuing to grow on a global basis.”
“U.S. bitcoin ETFs make up about 7% of the total market capitalization of bitcoin. Gold, it’s less than a percent,” Akins said.
Both Akins and Cavatoni say they see continued room not only for gold to grow, but also for gold ETFs.
“If you’re just looking at the gold market, it’s hard to beat any of the ETFs in terms of tracking the spot price,” Akins said. “It’s a great allocation vehicle, and exactly what ETFs were designed to be.”