Gold's Long-term Investment Case Hasn’t Changed, Says Aberdeen Standard Investments
(Kitco News) - The gold market will continue to ebb and flow as short-term sentiment shifts, but there is still a long-term investment case to hold the yellow metal as a strategic safe-haven asset, according to the third largest gold-backed exchange-traded fund.
Steve Dunn, Head of Exchange Traded Funds at Aberdeen Standard Investments, said that a collision of factors -- including ongoing financial market uncertainty and a low interest rate environment -- is creating the perfect environment for gold as investors look for safe-haven alternative assets.
Dunn added that because of long-term issues impacting financial markets, investors are turning to the firm’s gold-backed ETF (NYSE: SGOL), which is the lowest cost gold ETF in the marketplace.
Friday, the firm announced that SGOL reached the $1 billion market in assets under management putting it behind SPDR Gold Shares (NYSE: GLD), the largest gold ETF with assets over nearly $41 billion.
“When you are looking at a long-term investment, costs become an important factor for an asset manager and that is where SGOL has an advantage over other ETFs,” said Dunn. ““SGOL is well positioned to benefit from the current demand for gold because it is the cheapest way for U.S. investors to track the price of bullion.”
Renewed volatility in gold prices is expected in the near-term as investor sentiment shifts with each new headline, Dunn said. But, the underlying investment uncertainty will not go away anytime soon, he added, explaining that trade tensions and geopolitical instability will continue to weigh on growth expectations, which will ultimately keep interest rates lows.
And while gold appears be a little over extended, Dunn said that he is not expecting to see any major correction in the near-term.
“I don’t think you can ignore the run gold has had in the last 10 weeks and not expect some profit taking,” he said. “But, there is risk in the system and that will be good for gold.”
With gold trading at $1,500 an ounce, Dunn noted that the rally has exceeded the firm’s forecasts; however, he added that the market is probably close to fair value.
“I think we would need to see a major event risk to stretch gold higher,” he said.
And if investors are still looking for value in the precious metals space, Dunn pointed to the firm’s silver ETF SIVR.
“While gold is close to fair value we do see a lot more potential for silver from a value standpoint,” he said.