FX.co ★ Gold trades on fear

Talks on inflation are intensifying. As a result, investors are exploring a wide range of tools to combat it. Gold ETFs deserve top spot on this, particularly the Sprott Gold Miners ETF (SGDM).

Historically, gold is one of the tools used to fight inflation. Concerns about it are reflected in the sharp rise in Treasury yields, which may be partly due to inflation expectations.

"Gold usually trades on fear. Last year, prices rose amid concerns that lockdowns would harm the global economy. Gold is also doing well when investors are worried about inflation - as it does now, "CNN Business said.

But gold is not that expensive right now. Even after the 2020 rally, spot gold is still below historic inflation-adjusted highs. The rise in prices was also supported by strong growth in global investment.

In any case, many investors believe that inflation concerns will rise again if the US Senate passes President Joe Biden's $ 1.9 trillion bailout bill.

"Many are worried that the upcoming stimulus will overheat the US economy and lead to an even higher inflation. This, in turn, could lead to further increases in gold prices, "CNN said.

The SGDM tracks the performance of large gold companies whose stocks are listed on Canadian and major US exchanges. It uses a method that is designed to emphasize larger-sized gold companies with the highest revenue growth, free cash flow yield and the lowest long-term debt to equity.