Gold To Shine In 2020: ETFs To Consider

Although gold lost it sheen with the start of the fourth quarter on renewed risk-on sentiments, the outlook seems bright heading into the New Year. This is especially true given the looming uncertainty over the U.S.-China trade deal and fresh tariff threats from Trump. Notably, the precious metal is up more than 13% so far this year.

We have highlighted some solid reasons why gold will remain strong next year.

Trade & Tariff

With no imminent phase one trade deal, the prospect of the imposition of more tariff on Chinese goods from Dec 15 increases. Additionally, Trump is planning to restore tariffs on steel and aluminum imports from Brazil and Argentina in retaliation to currency devaluation. The administration also proposed tariffs of up to 100% on $2.4 billion worth of French products, including sparkling wine, cheese and other goods, to penalize France for a new digital services tax that has hit U.S. technology companies.

The election in November, Brexit issues and geopolitical tension will result in volatility in the stock market, thereby leading to strong demand for the yellow metal.

Weak Data

Apart from trade tensions, the latest data signals that U.S. economic growth is cooling down, making investors jittery. The Institute for Supply Management data showed that the U.S. manufacturing sector contracted for the fourth straight month in November as new factory orders dropped to their lowest level after 2012. Additionally, U.S. construction spending fell unexpectedly in October as investment in private projects tumbled to its lowest level in three years.

The International Monetary Fund (IMF) recently cut its global growth forecast from 3.2% to 3% — the lowest growth pace since the 2008-2009 financial crisis for this year — citing an increasing fallout from global trade friction. Against this backdrop, gold is considered a great store of value and hedge against market turmoil.

Easing Policies

The central banks across the globe have been on a monetary easing spree that is boosting demand for the yellow metal. The Fed has slashed interest rates three times this year and the European Central Bank also cut interest rates in a package of easing measures. Lower rates will continue to weigh on the dollar against the basket of currencies, raising the metal’s attractiveness as it does not pay interest like fixed-income assets.

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