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Gold, silver and copper hit highs: Will the rally last?
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Rate Cuts: Unlocking Safe-Haven ETF Potential

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Moomoo Research joined discussion · May 31 05:48
"Gold and silver are not naturally money, but money is naturally gold and silver." Common economic knowledge tells us that gold and other precious metals have a very important attribute - value preservation. From ancient times to the present, gold and other precious metals have been the safe-haven assets for people during turbulent times.
Looking at the long timeline, it is almost certain that the Federal Reserve will cut interest rates. After the Lunar New Year, the price of gold has been rising all the way, and in May, the price of gold once broke through 2400 USD, reaching a new historical high. What kind of investment logic does this contain?
Rate Cuts: Unlocking Safe-Haven ETF Potential
I. The Pricing Logic of Precious Metals
When looking for speculative opportunities that interest rate cuts bring to the precious metal market, we first need to understand how precious metals are priced and what factors can affect the price of precious metals in order to further analyze how interest rate cuts can benefit the prices of precious metals. Taking gold as an example, the factors affecting its pricing are nothing more than two points: the intrinsic real value of gold and the opportunity cost of holding it.
1.Real Value
The so-called real value is the premium enjoyed by holding gold, mainly reflected in three dimensions: the unit of value, supply and demand relationship, and fair hedging.
Unit of Value: Gold is usually opposed to the value of major currencies (such as the US dollar). When the currency value decreases, the function of gold as a store of value is enhanced, and the price rises accordingly.
Demand Relationship: As a commodity, the value of gold is fundamentally affected by supply and demand: if demand exceeds supply, the value rises, and vice versa, it will decrease.
Fair Hedging: "In prosperous times, collect antiques; in troubled times, buy gold." When interest rate cuts and other events shake the foundation of the modern monetary system, the attribute of gold as a value-preserving asset will be revealed, driving up its price.
2.Opportunity Cost
The so-called opportunity cost is the "lost income" from holding gold. It is mainly reflected in two aspects: the inherent disadvantage of zero-coupon assets and weaker liquidity than currency.
Zero-coupon assets: Gold cannot generate interest after being held, so the opportunity cost of holding gold is the coupon income that can be brought by investing in interest-bearing assets (stocks, bonds, etc.). To a certain extent, the price of gold is the shadow of the real interest rate, and short-term price fluctuations of gold are mostly due to market expectations of bond yields.
Weak liquidity: Although gold has a grandfather-like monetary attribute, it is not the mainstream of the times. Once a liquidity crisis occurs, various transactions and investment behaviors will drive up the demand for cash, and gold will lose in the competition of liquidity, with the price being under pressure.
In summary, when we judge the investment opportunities that interest rate cuts bring to gold and other types of precious metals, we can also approach from these factors.
II. The Impact of Interest Rate Cuts on Gold and Other Precious Metals
As mentioned above, "the price of gold is the shadow of the real interest rate." Once the Federal Reserve cuts interest rates, the nominal interest rate will drop in the first place, accompanied by the high inflation level in the United States, and the decline in the real interest rate will be a foregone conclusion.
Therefore, in this situation, the attractiveness of interest-bearing assets such as bonds and stocks compared to gold will decline significantly, and investors will be more inclined to hold various safe-haven assets - the prices of gold and other precious metals will continue to rise; at the same time, various assets in the market and banks around the world will vigorously buy gold and other precious metals to seek stability, and the market will be in short supply, further driving up its price.
Chart: The relationship between gold prices and US real interest rates (2022-2023)
Source: Wind
Source: Wind
After clarifying the speculative opportunities that interest rate cuts bring to gold and other precious metals, the following introduces some investment products related to precious metals in the US stock market, which investors can choose according to their needs.
III. Related Product Recommendations
In previous articles, we have been talking about that for the majority of investors, compared with directly investing in stocks and futures, ETFs are a safe and diversified investment product. Next, we will introduce the top five gold ETFs in the US stock market by market value for your reference.
1.Gold Market
$SPDR Gold ETF(GLD.US)$: This is the world's largest physical gold ETF, tracking the gold price of the London Bullion Market Association (LBMA). Buying this ETF is equivalent to indirectly holding gold, and you can directly enjoy the benefits brought by the rise in gold prices, providing investors with the opportunity to track the spot price of gold.
As of May 27, the asset size of GLD has reached 65.238 billion USD, with a nearly 13% increase from the beginning of the year, and its trading fee rate is 0.4%.
Advantage: Directly linked to the gold price, with a large asset size and extremely strong liquidity, suitable for high-frequency large transactions.
Disadvantage: The trading fee rate is relatively high (0.4%), and the long-term investment return may be affected.
Rate Cuts: Unlocking Safe-Haven ETF Potential
$Gold Trust Ishares(IAU.US)$This is also a large gold ETF in the US stock market, tracking the gold price of the LBMA, providing investors with the opportunity to directly trade gold spot. Its current asset size is 29.721 billion USD, lower than GLD. The increase in IAU from the beginning of the year has exceeded 13%.
Advantage: IAU's cost is lower than GLD (the trading fee rate is only 0.25%), suitable for investors in medium to long-term asset allocation.
Disadvantage: Although the reputation is high, it is still not as good as GLD, and the liquidity is relatively weak.
Rate Cuts: Unlocking Safe-Haven ETF Potential
$Spdr Gold Minishares Trust(GLDM.US)$It is also a US stock ETF that invests in physical gold. Unlike the above two physical gold ETFs, GLDM's asset size is only 7.584 billion USD, more suitable for small investors. At the same time, its trading fee rate is very low, only 0.18%, and the increase from the beginning of the year is 12.9%.
Advantage: The trading fee rate is very low (0.18%), suitable for long-term investors.
Disadvantage: The fund size is less than one-third of IAU and one-fifth of GLD, and the liquidity is far less than the previous two ETFs.
Rate Cuts: Unlocking Safe-Haven ETF Potential
$VanEck Gold Miners Equity ETF(GDX.US)$This ETF invests in a series of gold mining companies around the world, rather than directly investing in gold. Buying this type of ETF can not only indirectly enjoy the benefits brought by the rise in gold prices but also benefit from the performance growth of gold industry companies.
Advantage: Can enjoy the benefits brought by both the rise in gold prices and the performance growth of gold industry companies.
Disadvantage: The trading fee rate is relatively high (0.51%), which is not conducive to medium to long-term investment returns.
Rate Cuts: Unlocking Safe-Haven ETF Potential
As of May 27, its asset size is 14.518 billion USD, and the trading fee rate is 0.51%. The increase from the beginning of the year is 13.71%. The product's holdings include well-known mining companies such as Newmont Mining and AEM.
Rate Cuts: Unlocking Safe-Haven ETF Potential
$VanEck Junior Gold Miners ETF(GDXJ.US)$: Similar to GDX, it also invests in gold mining companies around the world, but GDXJ focuses more on small to medium-sized gold mining companies.
Advantage: Similar to GDX, it can obtain benefits from both the rise in gold prices and the performance growth of companies.
Disadvantage: The investment is in small and medium-sized mining companies, with an asset size of less than half of GDX, and the fee rate is not low (0.5%).
Rate Cuts: Unlocking Safe-Haven ETF Potential
As of May 27, its asset size is 5.462 billion USD, and the trading fee rate is 0.5%. The increase from the beginning of the year is 17.65%. The product's holdings include small and medium-sized mining companies such as AGI and Harmony Gold.
Rate Cuts: Unlocking Safe-Haven ETF Potential
2.Silver Market
Due to the relatively few silver ETF products in the US stock market, we have selected the top three silver ETF products by market value for your reference.
$iShares Silver Trust(SLV.US)$SLV is the world's largest physical silver ETF, holding physical silver and tracking the spot silver price trend. As of May 29, SLV's asset size is about 13.42 billion USD, with a trading fee rate of 0.50%, and the increase from the beginning of the year is 35.25%.
Advantage: The largest existing asset size of silver ETF, providing good liquidity for investors.
Disadvantage: The management fee rate is relatively high (0.50%), and there may be a certain accumulation of costs for long-term holding.
Rate Cuts: Unlocking Safe-Haven ETF Potential
$Abrdn Silver ETF Trust(SIVR.US)$: SIVR also directly tracks the price of physical silver. The silver bars of this ETF are stored in a vault and regularly inspected, without participating in futures contracts.
Advantage: Compared to SLV, the fee rate is lower (0.30%), which can save trading costs.
Disadvantage: The asset size is smaller, and liquidity is lower.
Rate Cuts: Unlocking Safe-Haven ETF Potential
As of May 29, SIVR's asset size is about 1.429 billion USD, with a trading fee rate of 0.30%, and the increase from the beginning of the year is 35.16%.
$Global X Funds Global X Silver Miners Etf (Post Rev Spl(SIL.US)$: SIL does not directly track the silver price but tracks the Silver Miners Index (Solactive Global Silver Miners Total Return Index), which includes mining companies involved in silver exploration, mining, and refining.
Advantage: The components cover well-known silver mining companies in Canada, Russia, the United States, and other countries, including Wheaton Precious Metals (WPM), Pan American Silver (PAAS), etc.
Disadvantage: The trading fee rate is 0.65%, which is the highest among the three ETFs, and the stock price performance will be affected by the operating conditions of silver mining companies.
Rate Cuts: Unlocking Safe-Haven ETF Potential
As of May 29, SIL's asset size is about 1.214 billion USD, with a trading fee rate of 0.65%, and the increase from the beginning of the year is 28.2%.
Rate Cuts: Unlocking Safe-Haven ETF Potential
3.Copper Market
Similar to the silver market, the following are the top three copper mining ETFs in the US stock market, which can be used as an investment reference.
$United Sts Commodity Index Fd Com Unit Repstg U S Copper Index Fd(CPER.US)$: Tracks the SummerHaven Copper Index Total Return index, which tracks the performance of copper futures contracts, providing investment directly related to copper prices.
As of May 29, CPER's asset size is about 232 million USD, with a trading fee rate of 0.65%, and the increase from the beginning of the year is 23.86%.
Advantage: Directly tracks copper prices, suitable for investors with a clear view of the copper market.
Disadvantage: The market value is smaller, liquidity may be limited, and the fee rate is high (0.65%).
Rate Cuts: Unlocking Safe-Haven ETF Potential
$Global X Copper Miners ETF(COPX.US)$: Tracks the Solactive Global Copper Miners Index. This index covers copper exploration companies, developers, and producers, providing a comprehensive exposure to the copper mining industry.
Advantage: Provides a broad investment portfolio of global copper mining companies, including KGHM (Polish Mining Group), First Quantum Minerals (FM), etc.
Disadvantage: The fee rate is relatively high (0.65%), and the product performance is affected by the operating conditions of copper mining companies.
Rate Cuts: Unlocking Safe-Haven ETF Potential
As of May 29, COPX's asset size is about 2.7 billion USD, with a trading fee rate of 0.65%, and the increase from the beginning of the year is 34.56%.
Rate Cuts: Unlocking Safe-Haven ETF Potential
$ISHARES COPPER AND METALS MINING ETF(ICOP.US)$: A newly listed copper industry ETF in June 2023, tracking the STOXX Global Copper and Metals Mining Index. This index focuses on global copper mining companies, providing investment opportunities in this specific industry.
Advantage: The holdings cover multiple copper mining companies, including well-known companies such as Southern Copper and Freeport-McMoRan; the fee rate is lower (0.47%), suitable for long-term holding.
Disadvantage: The listing time is less than one year, and the market value is smaller compared to established ETFs like COPX, with lower liquidity.
Rate Cuts: Unlocking Safe-Haven ETF Potential
As of May 29, CPER's asset size is about 25.5 million USD, with a trading fee rate of 0.47%, and the increase from the beginning of the year is 30.67%.
Rate Cuts: Unlocking Safe-Haven ETF Potential
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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