According to Larry Tentarelli, chief technical strategist and founder of Blue Chip Daily Trend Report, gold is a smart investment idea as government budget deficits grow, and interest rate cuts are likely to be an additional tailwind. Gold has risen as a safe haven, in part due to the widening of the U.S. government’s budget deficit. Tentarelli said it’s likely to rise further as the deficit doesn’t shrink. Tentarelli likes gold anyway, but sees a lot of upside potential if the Federal Reserve starts lowering its cost of funds to stimulate the economy. Historically, gold prices have been inversely correlated with real Treasury yields, and if yields fall, gold should rise further. “Even without a rate cut, gold is favorable from a deficit macroeconomic perspective,” said the Merrill Lynch alum. “But if the Fed cuts interest rates, even once, I think gold will…(really) soar.” Investors are holding off on predictions about when the central bank will ease the brakes this year, as inflation has proven difficult to return to the Fed’s 2% target. But interest rate futures traders are now pricing in about a 59% chance that the Fed will cut borrowing levels at its September policy meeting, according to CME’s FedWatch tool. @GC.1 YTD pile of 2024 gold futures. In that case, investors will want to hold the SPDR Gold Shares (GLD) ETF, Tentarelli said. The fund, which seeks to track the price of gold bullion, is up 13.6% in 2024 after rising more than 12% last year. Those who want to hold gold for at least five to 10 years can consider buying gold bars at Costco or elsewhere. But for most people, Tentarelli said the “smartest way” to invest in gold is via ETFs. In the short term, he said, gold could rise this week if economic indicators are as weak as Monday’s ISM manufacturing index. Any signs of a slowdown would boost the bond market. The 10-year Treasury fell more than 11 basis points on Monday. @HG.1 YTD piles in 2024 copper futures prices. Tentarelli pointed to copper as another area to put money as the end of the year approaches. To get in, Tentarelli recommended the Global X Copper Miners ETF (COPX). The fund includes the world’s largest producers, including Freeport-McMoRan and Southern Copper, and is already up 28.5% this year through Monday’s close. “To me, that’s the easiest and most liquid way to get into copper mining,” Tentarelli said.
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