Buy Four Gold Mutual Funds As Price Of The Yellow Metal Soars

Gold had touched a near four-week high lately, thanks to declining expectations of a rate hike and looming Brexit fears. Possibility of a rate hike declined this month due to discouraging jobs report, which also raised questions about the health of the economy. Meanwhile, volatility spiked as more British citizens opted for a Brexit.

These uncertainties boosted gold’s appeal as a store of value. Gold already had a stunning rally surging around 20% this year. Hence, investing in mutual funds whose assets are invested in securities of gold looks to be a prudent move.

Rate Hike Expectations Diminish

Thanks to May’s lower-than-expected nonfarm payroll number, Fed futures data indicates no chance of a rate hike on Wednesday, down from a 24% likelihood at the end of May. The U.S. economy had added just 38,000 jobs in May, the weakest level of hiring in almost six years, according to the Labor department. The pace of hiring also slowed down to an average 116,000 in the past three months.

The jobless rate, on the other hand, fell to 4.7% last month, its lowest level since Nov 2007. But, the drop was mostly due to a number of people dropping out of the labor force and was therefore counted as unemployed. Now this isn’t a promising sign. Moreover, dismal jobs report pointed to weakness in the economy. This is bound to have a repercussion on consumer confidence. This might hamper spending levels that have been one of the bright spots driving the U.S. recovery.

Lower interest rates generally tend to boost precious metals such as gold, as it makes yield-bearing assets such as U.S. Treasuries less attractive. Lower rates also adversely affect the dollar, which in turn raises the appeal for such metals. Moreover, when a country’s growth prospects are headed south, investors mostly get out of risky investments like stocks. Precious metals tend to retain their value and even increase their value during times of market downturn.

 “Brexit” Risk

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