Three Ways to View the Gold Rally from an Equity Viewpoint

Despite reaching all-time highs above $2,000 per troy ounce this summer, gold prices might still have room to run, according to Franklin Equity Group’s Steve Land. In addition, he shares some reasons why the current environment could present new opportunities for gold-focused miners to redefine themselves as stronger businesses.

Gold prices rose above $2,000 per ounce for the first time in August, as investors responded to a weaker US dollar, record-low US real yields and intensifying US-China geopolitical tensions. The unprecedented amounts of stimulus and other relief funding used globally to prop up economies hobbled by the COVID-19 pandemic, including rock-bottom interest rates, have also continued to be a boon for the price of gold.

Although gold prices reached historic highs this summer, we still see some potential drivers that could move prices even higher. In our view, gold may benefit from bouts of elevated market volatility and mounting concerns over the coronavirus’s economic impact as investors seek perceived safe-haven assets. A classic feature of gold is its very low correlation with other asset classes, supporting increased interest in owning it as a portfolio diversification tool in uncertain markets.

Opportunities for Gold Producers

We continue to like the long-term prospects for select gold- and precious-metals-focused equities, especially if gold prices can hold near current price levels or move even higher in the months ahead. In our view, peak gold prices present gold producers with opportunities to redefine themselves as a vital part of a diversified investment portfolio.1