Stars Aligning for More Gold Upside

The gap between some spot gold exchange traded funds and S&P 500-tracking funds is as wide as 1,000 basis points on a year-to-date basis. In favor of the precious metal, that is. That confirms the metal is in the midst of a new bull market. That's a market some experts believe has tailwinds and the potential to be lengthy.

Importantly, bullion’s recent strength isn’t confined to the spot market. Its miners are getting in on the act, too, highlighting opportunity with the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN). That actively managed ETF is unique among the precious metal funds. That's because it provides exposure to gold futures contracts and shares of miners in one-stop shopping form.

GDMN’s methodology could be all the more attractive at a time when Wall Street is getting increasingly bullish on the metal. Add to that, the recent price action of miners is encouraging. That's because those stocks often lag or don’t participate in spot gold bullishness. That’s clearly not the case this year.

Banks Backing Gold

While the precious metal's futures for June delivery settled around $2,383 on Monday, Citi sees the potential for significant upside for bullion, which could benefit ETFs such as GDMN. In a recent report, the bank said the yellow metal could surge to $3,000 per troy ounce over the next six to 18 months. Citi also boosted its floor  for the metal's forecast to $2,000 an ounce from $1,000.

“The recent gold rally has been aided by geopolitical heat and is coinciding with record equity index levels,” noted the bank.

Citi analysts Aakash Doshi and Arkady Gevorkyan said the yellow metal will "shine bright like a diamond” this year. They boosted their year-end price target for bullion to $2,350 an ounce. Long-term investors considering ETFs such as GDMN should acknowledge that forecast. That's because the Citi analysts believe gold could surge to $2,875 per ounce by the end of 2025.

Citi isn’t the only bank that’s increasingly constructive on bullion. Citing the possibility of monetary easing by the Federal Reserve, Goldman Sachs said there’s a pathway to $2,700 by the end of 2024 for gold. In a report to clients Tuesday, Deutsche Bank said it sees gold prices at $2,400/oz by year-end. That sets the commodity up for a run to $2,600 by the end of next year.

“Gold is likely to remain on a strong [footing. Any] profit-taking by early investors would be replaced by investment from those who have so far not participated in the move,” according to the bank.

For more news, information, and analysis, visit the Modern Alpha Channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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