Source: Barron Chinese

Although international gold prices have fluctuated recently, a series of factors may drive gold prices to continue to rise, and investors can participate in the upward trend through gold ETFs and gold mining stocks. Silver is also expected to have room for upward.

During the Asian trading session on Thursday (February 27), international spot gold fell below $2,900 per ounce, further falling from its all-time high.

Analysts believe that this round of pullback is part of the profit-taking cycle and long-term bullish factors have not changed. "Gold prices are still on the rise overall, and we believe the price pullback is due to investors' profit-taking operations rather than changes in market sentiment," said David Meger, head of metal trading at High Ridge Futures. "The rise in gold is hard to ignore, and a series of factors may drive prices to continue to rise.

The price return of gold futures has been 42% in the past 12 months, more than double the S&P 500’s 19% return (including dividend reinvestment). For a commodity that has little use in real life and does not generate returns or interest, gold performs quite well. In addition, the reasons for the rise of gold seem to be contradictory. It is considered a defensive asset but rises along with the stock market and the economy. The trend of gold denominated in US dollars should be the opposite of the trend of the US dollar, but it also violates this rule; gold is usually considered an inflation hedge tool, but the sharp rise in gold prices coincides with the slowdown in inflation.

However, investors should not rush to sell by simply contradictory reasons for the rise. "Gold is just my pet stone, but I won't sell it," said David Jane, portfolio manager at Premier Miton, London. 5% of the $1 billion fund managed by Jane, who said, "You can't determine the price of it, I won't rush to sell it."

Gold has historically been considered a means of store of value. According to the World Gold Council, financializing all mined yellows in the world is a cube with a side length of 25 yards, which is about the volume of a one-story building. In addition, even if miners do their best to mine gold, their annual output can only increase by 1% to 2%. If the supply is relatively fixed, then the change in price depends entirely on demand.

Demand has grown significantly. Central banks in various countries that diversify reserve assets have been buying gold. Data from the World Gold Council shows that central banks' gold purchases exceeded 1,000 tons for the third consecutive year in 2024, and in the past few years, gold purchases have been particularly significant.

Philip Newman, founding partner of consulting firm Metals Focus, said central banks cannot ignore prices completely when buying, but, As the value of gold they hold rises, this means they can buy more with greater confidence, especially when the price of gold falls. "The support level for gold prices is strong and is rising," Newman said.

Retail demand for gold is quite considerable around the world. World Gold Council data shows that gold jewelry consumption rose by 9% last year. In , some insurance companies have begun to pilot investment in gold, and ordinary families have also had a strong demand for gold. Others scrambling to buy gold may think that the uncertainty Trump brings to the world order is expected to drive gold up, even as stocks and the economy still perform well. "Gold will do well when the global situation is tense," said Krishan Gopaul, an analyst at the World Gold Council.

The sharp rise in gold may also be affected by other factors. Expectations about the possible U.S. tax on gold imports in the near future have pushed up the price of physical delivery of gold, and in turn, the price of borrowed gold. Gavekal Research noted that this created a "short squeeze" that anyone who bets on a decline in gold has to suddenly change their bets, pushing the gold price further. "This means that the fundamentals of the gold bull market are still strong and the technical side is rock solid," Gavekal Research's Louis-Vincent Gave wrote in a report. "Premier Miton's Jane believes that the rise in gold may also benefit from having too much money to invest, creating a momentum that won't stop." Jane said: "I think the positive relationship between gold and stocks shows that the global excess liquidity is sucked away by gold, just as these liquidity are sucked away by large-cap American stocks and anything else that looks attractive at the moment. This reflects speculation, not fear."

This momentum is expected to continue. $3,000 may become an important psychological price, but many analysts expect gold prices to rise even higher. In February this year, Goldman Sachs and UBS raised their 2025 gold price expectations to $3,100 and $3,200, respectively. Meanwhile, Bank of America analyst Michael Widmer believes that if investment demand grows by 10%, gold prices may hit $3,500, he wrote in a report, "This is a pretty high price, but not impossible." World Gold Council data shows that gold ETFs worldwide received $3 billion inflows in January, driven by European demand, compared with a net outflow in the same period last year.

Source: Morning Star

Buying gold is easy, you can go to Costco or Walmart near your home to buy gold bars or coins, but they are more like souvenirs than investments and are difficult to sell. A better choice is to buy gold ETFs, such as the SPDR Gold Shares ETF with an asset management scale of US$85 billion and a 0.4% fee, or the iShares Gold Trust with an asset management scale of US$38 billion and a 0.25% fee.

Gold mining stocks are another option to participate in gold rises. Profits of gold mining companies should have grown more or less as gold rises, but their stocks underperformed gold over the past three years meant it was time for gold mining stocks to catch up. The $14 billion VanEck Gold Miners ETF includes multinational gold mining companies such as Newmont and Barrick Gold (GOLD), which has a fee rate of 0.51%, and a return of 19% this year including dividend reinvestment and SPDR Gold ETF with a return of 11%. The VanEck Junior Gold Miners ETF with an asset management scale of US$5 billion and a fee rate of 0.52% has a return of 17%.

Individual stocks, Institutional View analyst Andrew Addison pointed out that Gold Fields (GFI), which operates in Australia, Ghana, Peru and South Africa, rose 44% this year and is expected to break through the 30-year trading range. He wrote in his research report, "Don't miss this stock" because its bottom is the largest of all gold mine stocks. Addison also advises investors to buy when the stock price falls from the latest $19 to $18, and the stock price is expected to rise above $20.

Investors who are worried that gold will lose momentum after the rise can choose silver. Silver has more industrial uses than gold, but the price trends of the two metals are similar. As silver demand in manufacturing decreases, silver futures rose only 6.8% this year, while gold futures rose 10%, and silver futures may have more room for growth if the economy continues to recover. Investors can consider the iShares Silver Trust with an asset management scale of $14 billion and a fee rate of 0.5%.

Newman of Metals Focus said: "Investors are not paying much attention to silver, but if gold reaches $3,000, investors may start chasing silver." ”