Treasury Secretary Scott Bessent’s announcement that the Treasury could use $1 trillion of Treasury General Account money to fund bond buybacks is the latest indication of a darkening outlook for the U.S. dollar. As yields rise and the debt climbs amid the ongoing Strait of Hormuz conflict, the dollar appears more and more precarious. This landscape may invite greater consideration of gold ETFs like the (AAAU ) as solutions.
- Gold ETFs like AAAU could help investors amid growing pressure on the dollar, returning 7% YTD.
- That return outpaced the ETF Database Precious Metals category average over the same period.
- AAAU’s strategy takes advantage of the ETF wrapper’s flexibility and tax efficiency to make it a nice hold to consider.
AAAU charges an 18 basis point fee to track the spot price of gold. The gold ETF invests in bars held in the U.K., with the daily NAV of the fund set using the LBMA PM Gold Price. Together, the overall strategy provides a straightforward route into gold and could serve as a useful tool with the U.S. dollar currently under growing pressure.
While higher yields usually bolster the U.S. dollar, they can also indicate risk and concern associated with economic distress. Stubborn inflation, an eye-popping U.S. debt number, and the chaos around global energy prices are currently pushing yields higher and putting pressure on the government.
As these factors continue to loom, the Federal Reserve has also shifted its approach to the public. Reduced guidance from the central bank only adds another layer of uncertainty around currency volatility and potential government responses.
This positions AAAU as an appealing tool for adding durability and downside protection to a portfolio. While there are still plenty of gains to be had in equities, the ETF wrapper’s flexibility, transparency, and tax friendliness makes adding gold exposure an easy lift.
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According to ETF Database data, AAAU has returned 7% YTD and outperformed the ETF Database Precious Metals category average over the same period. What’s more, the fund has consistently outperformed peer gold and metals ETFs over three- and five-year periods as well.
Looking ahead, the strategy could very well serve as a handy portfolio diversifier for rising monetary and economic uncertainty. With risks to the dollar sticking around for a while yet, AAAU continues to stand out as a fund to watch.
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