Gold Mining Stocks
The investors seeking for a long-term view of gold need to keep in mind that there is no consistent co-relation between gold and other financial assets. There have been sharp ups and downs in the gold market from the 90s to 2000. The stock prices showed a tremendous variation for gold stocks from 2002 ending to December 2017. The demand for all the metals increased in China which gave a better scope to the Gold market.
The Federal Reserve made gold cheaper for the investors to buy in the global world. However, the monetary winds are in the new direction in the present. US dollar is going lows in accordance to the major currencies of the world. The money supply by Fed has been slowly reduced. An improvement in the economy requires higher gold demand, in the form of physical assets. This demand is mainly led by the countries like China, Russia, India, and Africa. The issue with gold investment is that it doesn’t pay off any dividends.
Gold Mining Stocks & ETFs
Many investors like to bet on gold mining companies and ETFs. Gold mining company stocks contribute to higher risks than that of ETF. The gold mine might be terminated due to war, strikes or other issues. The mining firms also limit the revenue if there is a high rise in the gold prices. The mining company investments for the stockholders have been disappointing in the last decade. If you want to get returns on your investment by ETFs, the best option is to think long-term and limit daily trading.
Macroeconomic factors affecting Gold
The US economy is going slow in growth but there are signals of high stepping up. The GDP of the United States enhanced to a level of 1.2 percent in the initial quarter of 2017 and consequently, the next two quarters were 2.6 percent and 3.2 percent respectively. There have been continuous gains resulting in higher price indexing with better prospects for investors.
There have been news from China for cutting short its annual growth forecasts and reforming the economic model after many years of export connected growth. The economic growth will reduce the chances of economic freezing and there will be big growth expected for gold. Money managers also tend to loosen its balance sheet to an appropriate level. The Fed bought many mortgage-backed securities and Treasury bonds for keeping the money cost at lower levels. Government bonds are anticipated to lead more money flowing into the other assets, like gold and hence, there is a growth expected in this segment.
The price of the gold is going ahead in coordination with the real interest rates. There is not much expectation for the hike in the interest rates and the market will now look for the long-term investment options to reap the best benefits by gold investment. Gold stocks will probably bloom for the people looking forward to long interval investments.