Gold futures prices increased on Tuesday as the market continued to suggest that the U.S. dollar may be approaching or even leveling off its peak value after a difficult year for other currencies affected by central bank decisions and geopolitical unrest. A gold mining ETF like the Sprott Gold Miners ETF (SGDM) may present an exciting opportunity for investors if the dollar continues to deteriorate.
Although it has since risen to about 106, the dollar may yet weaken as a result of signs that China’s zero-COVID policies may be relaxed, which could provide further relief for the Chinese and Hong Kong equity markets.
Domestically, should markets have already priced in an additional 50 basis point rate hike from the Fed, the dollar could fall even further if the Fed releases a dovish general outlook for the coming year. A softer-than-expected CPI report in early December could be a key sign for the dollar and the coming year, even though more encouraging labor market news may whet the Fed’s appetite for more aggressive increases.
When compared to physical gold, gold mining stocks are relatively affordable, near a 35-year low, and have the potential to gain from investors turning to gold as fixed income yields decline.
The gold mining ETF’s three-month return of 7.3% was maintained over the past month with a return of 7.7%. That represents a significant improvement over its overall YTD return of -14.6%, and according to VettaFi, SGDM has also added net inflows of $4.8 million over the past month and $1.2 million over the past five days.
With so many variables at play, an ETF of gold miners offers a diverse set of exposures to the industry as a whole, and it might be a good play going into 2024.