Market experts share 4 ways to make money on rising gold prices – Investing.com

Since the start of the year, gold has gained 12.8% in USD terms, outpacing gold’s 2.8%, 4.3% and long-term U.S. Treasuries’ 20.4%. In a recent note, a financial research firm outlined four ways investors can gain exposure to rising gold prices.

gold price rises

In early 2024, gold prices soared to new record levels, with the yellow metal exceeding $2,400 an ounce last month.

The main driver of this rise is strong demand for gold from global central banks and Asian households.

After a recent trip to China, UBS strategists said there was widespread optimism for gold in the world’s second-largest economy, despite concerns about rapid price increases and collapsing macro correlations.

Chinese market participants, like global market participants, are interested in the drivers of gold purchasing activity.

In the short term, Chinese investors generally view falling gold prices as a buying opportunity. While there is medium- to long-term optimism for gold prices, many expect a period of price stabilization in the short term.

This pause could reinvigorate physical demand, which had slowed recently, and readjust speculative interest.

Similar to China, other emerging markets (EMs) are also showing strong interest in bullion.

Almost all physical gold purchases come from emerging economies, with around 30% of global purchases coming from Greater China, 25% from Greater India, 20% from the broader Middle East, and about 10% from Russia and independent states. It’s a community.

This demand may be due to cultural biases and a lack of trust in local government, the rule of law, and domestic financial institutions. As a result, gold becomes a natural savings destination in these economies.

This trend explains why gold prices tend to rise when emerging economies are doing well, and fall when entrepreneurs in these regions are struggling.

How to react sensitively to rising gold prices

In contrast to Asian investors, European and American investors have not yet significantly participated in the gold bull market.

But if they decide to participate, it could be difficult to identify marginal gold sellers, especially if emerging market growth continues, Gabekal Research analysts recently said. pointed out in the memo.

For investors looking to take advantage of this potential scenario, the financial services firm suggested four ways to gain exposure to rising gold prices.

1)”hold the metal straight“This is simple, clean, and fluid, and there are likely to be few negative surprises,” Gabekal analysts said.

2)”Acquire a gold royalty companyAccording to Gavekal, these companies tend to offer a low beta to gold price movements and often trade at high valuations.

3)”buy precious metal miner:’ After a decade of underperformance, these stocks are attractively valued and undervalued. However, as Gavekal analysts point out, there are some issues to consider here.

Despite investing billions of dollars over the past decade, miners have not discovered significant amounts of gold. Additionally, gold mining is an energy-intensive business, and increases in energy prices can impact profitability.

“Also, much gold mining takes place in parts of the world where property rights are ‘flexible’, and rising gold prices could tempt governments such as Mali and the Democratic Republic of the Congo to nationalize mines. There is a gender. It’s strong,” they continued.

Four)”Purchasing brokers and money management companies specializing in precious metals:’ These companies profit from increases in volume rather than price, but in a typical bull market, volume tends to increase with price.

“So far, we have seen an increase in gold prices across developed markets (excluding Japan), but volumes have not yet increased. If this is the next step in the gold bull market, this portions may well flourish,” Gavekar’s team said.