Gold hasn’t returned yet to the peak reached in August 2020, but recent returns are strong despite market expectations that inflation peaked, observes Bob Carlson, editor of Retirement Watch.
A lower dollar usually helps gold. The U.S. dollar has fallen below its peak and is down more than 8% in the last three months. Expectations of lower interest rates also support gold’s price. Increased geopolitical conflicts and worldwide political uncertainty are other factors that propel gold higher.
To increase our gold exposure, we are bringing back a previous winner, the ETF iShares MSCI Global Metals and Mining Producers (PICK) which tracks the MSCI ACWI Select Metals & Mining Producers index, excluding gold and silver miners.
The companies in the index sell at attractive valuations and have low debt levels. Most will generate attractive shareholder returns at recent commodity prices and even at lower prices. There has been little investment in production in recent years, creating a long-term supply-demand imbalance.
Commodity prices will rise, and investor returns will increase, any time global growth rises. Commodity prices also could spike again if China’s growth rate increases as it relaxes its extreme pandemic policies and takes other actions.
PICK recently had a yield of 6.92%. The fund had a tough time in 2022 but is bouncing back. It is up 14.19% in the last four weeks, 38.76% over three months, 12.83% for the year to date and 7.42% over the last 12 months.
The fund owns more than 250 stocks, but 53% of the fund is in its 10 largest positions. Top holdings recently were BHP Group, Rio Tinto, Vale, Glencore and Freeport-McMoRan.