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Trade war fears and a 6 month low gold price means it may be a good time to invest in the gold sector

Gold is well known as an investment safe haven, which acts as a store of wealth over time. Gold often does well in bad times, but this is not a given. This past month the fear (volatility) index rose and investors withdrew record amounts of money out of equity funds, moving back into US Treasury Bills (cash). Added to this the oil price stealth bull run, has inflation fears rising to the surface again. Is it time to add some gold to your portfolio?

Below is a one year graph of the CBOE Volatility Index (‘the fear index”) showing the recent June upwards spike to be quite small compared to last February 2018 when investors were worried about inflation and rising US interest rates. This time the fear is about Trump’s tariffs and trade wars. The way things are going many fear it may get a lot worse before it gets better.

The late June 2018 spike in the CBOE Volatility Index (‘the fear index”)

VIX spike in June smaller than last February 2018

The gold spot price has recently dropped to a 6 month low, which may be an opportune time to buy given the increased level of risk right now with a global trade war potentially just in the early stages of intensifying. Looking at the charts below gold has mostly met downside resistance at US$1,200-1250/Oz. At the current gold spot price of US$1,253 now is a good time to take another look at the gold sector.

Gold price charts for 1, 5, and 28 years

Popular gold metal and gold miners funds

Funds such as the SPDR Gold Trust ETF (NYSEARCA:GLD) and the iShares Gold Trust ETF(NYSEARCA:IAU) give exposure to the gold metal price. These do well if the gold spot price rises and vice versia.

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MARKET SUMMARY

INDICES

Name Last Change
DOW 26743.50 0.32%
S&P 500 2929.67 0.04%
NASDAQ 7986.96 0.52%
TSX 16224.13 0.06%
TSX-V 719.95 0.00%

Resource Commodities

Name Last Change
Gold 1197.34 0.18%
Silver 14.27 0.21%
Copper 2.84 0.000
Platinum 826.00 0.18%
Oil 70.78 0.65%
Natural Gas 2.98
Uranium 27.38 0.48%
Zinc 1.10 0.00%

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