Canada's TSX stock index edged higher on Tuesday, boosted by major and junior gold miners after prices of the yellow metal climbed further this week after a much needed healthy correction during last week’s Friday session.
Gold process rose more than 1% on Tuesday and climbed back above the $2,000 level breached earlier this month. As a whole, the materials sector added 0.9% as gold futures rose 0.9% to $2,002.3 an ounce.
So far this year, gold has climbed more than 32% this year, fuelled by further stimulus measures from central banks and governments around the world in an attempt to help economies recover from the pandemic. The recent pressure on the U.S dollar, concerns over a second Covid-19 wave and increasing geopolitical uncertainty have added to gold’s allure.
Gold’s uninterrupted rally has seen a wave of institutional investors and investment houses acquire positions in Canadian junior gold miners and gold ETFs. On Monday a SEC filing revealed that billionaire investor Warren Buffett’s company Berkshire Hathaway initiated a $562 million position in miner Barrick Gold in the second quarter.
Exchange-traded funds that track physical gold, including the popular SPDR Gold Shares Trust (GLD), have registered an increase in interest from investors as well. The VanEck Vector Gold Miners (GDX) and Junior Gold Miners (GDXJ) ETFs reversed course, each falling less than 1%.
Year to date, however, junior gold miners have demonstrated strong performance and ETFs that provide exposure to a global universe of publicly traded small- and medium-capitalization companies have benefited from it. GDX and GDXJ are up about 46% and nearly 45% for 2020, respectively, while the GLD and its peers all mirror gold’s gains, up about 32%. GLD is now the sixth-largest ETF on the market, with more than $79 billion in assets under management as of Monday.
“It’s clear that ETF investors want to be in gold,” Dave Nadig, chief investment officer and director of research at ETF Trends and ETF Database, told CNBC’s “ETF Edge” on Monday.
As gold supply continues to dwindle due to interrupted production amid coronavirus-related shutdowns, the supply side is in a really bullish state.
Analysts expect the remainder of 2020 to be quite tumultuous as there is nothing in the way of gold. Although the demand for gold bars fell to 11-year lows in the first half of this year and global appetite for jewelry has also been on the decline, ETF buyers are currently driving most of the demand for the physical metal.