Snap up gold ETF ahead of potential interest rate cuts as deficits persist, market pro says

Gold is a smart investment idea amid heightened government deficit spending — and any cuts to interest rates are likely to provide a further tailwind, according to Larry Tentarelli, chief technical strategist and founder of the Blue Chip Daily Trend Report . Gold has been rising as a safe-haven trade thanks in part to yawning U.S. government budget deficits. It’s likely to further appreciate due to a lack of progress in narrowing the deficit, Tentarelli said. While Tentarelli favors gold in any case, he sees substantial room to run if the Federal Reserve starts to lower the cost of bowering money, which will stimulate the economy. Historically, gold prices have been inversely correlated with real bond yields, meaning when yields decline, gold should rally further. “Even if there’s no rate cuts, I like gold based on the macro of deficit spending,” the Merrill Lynch alum said. “But if the Fed does cut rates — even one time — I think gold … (can) really take off.” Investors have pushed out expectations of when the central bank will take its foot off the brake this year as inflation has proven difficult to return to the Fed’s 2% target. But interest rate futures traders are now pricing in an approximately 59% likelihood that the Fed will lower the borrowing level at its September policy meeting, according to the CME’s FedWatch tool. @GC.1 YTD mountain Gold futures year to date in 2024. In that event, investors will want to hold the SPDR Gold Shares (GLD) ETF, Tentarelli said. The fund, which aims to track the price of gold bullion, has added 13.6% in 2024 after climbing more than 12% last year. Those wishing to hold gold for at least 5 to 10 years could consider buying gold bars from Costco or elsewhere. But, for most, the “smartest way” to play gold is through the ETF, Tentarelli said. In the near term, he said gold could take a leg up this week if economic reports come in as weak as Monday’s ISM manufacturing survey. Signs of a slowdown would boost the bond market. The 10-year U.S. Treasury notably fell more than 11 basis points on Monday. @HG.1 YTD mountain Copper futures prices in 2024. Tentarelli pointed to copper as another area to put money to work as we near the end of the year. To participate, Tentarelli recommended the Global X Copper Miners ETF (COPX) . The fund includes the world’s largest producers, such as Freeport-McMoRan and Southern Copper , and has already jumped 28.5% this year through Monday’s close. “For me, that’s the easiest and the most liquid way to participate in the copper miners,” Tentarelli said.