Gold’s Post-Election Moves: Key Investment Opportunities

Key Points

• Gold prices reached record highs earlier in the year after falling post-election, but have since recovered most of those declines.
• The complex array of factors—including inflation, interest rates, potential policies of the incoming administration, and more—may make the price of gold increasingly volatile.
• Besides physical gold and gold futures, investors looking for indirect exposure might look to the stocks of mining companies, or to ETFs focused on those companies.

The spot price of gold has climbed by more than a third in the last year, repeatedly reaching all-time records in the last several months. Leading up to the November election—and amid a protracted period of investor uncertainty surrounding inflation and other concerns, as well as anticipation of lowered interest rates—gold's role as a safe haven likely helped to push it to new heights.

However, since the election, the precious metal has behaved more erratically. The price fell by about $180 per troy ounce, or about 6.5%, between the day of the election and a low point in mid-November. Investors were inclined to interpret this movement in several possible ways: as a sign of stability following the election and as an image of the coming administration's policies came into view, or in response to a stronger dollar and higher Treasury yields, or for any number of other reasons.

Toward the end of November, however, gold sharply reversed course and resumed its upward climb. While gold prices are often negatively correlated to the strength of the dollar, the price of the commodity has risen even as the greenback has remained strong. It could be that gold has seen a short-term boost as a result of an uptick in military action in Ukraine, pushing investors once again toward safe-haven assets. In any event, retail investors now face a difficult path when choosing how to invest in gold or gold-related stocks. Here are some of the primary access points to this precious metal and a few considerations to keep in mind.

Gold Bullion and Futures

Investors had a seemingly brief window following the election to buy physical gold or gold futures while the prices were deflated, though by now the recovery has erased most of that discount. For that reason, investors might wish to focus on these investments related to gold if they anticipate the price to continue to move higher, once again approaching record levels.

This motion could happen if geopolitical uncertainty continues to grow, or if the dollar weakens, as some investors anticipate if the Federal Reserve continues to cut rates. However, it may also be the case that policies of the new administration could have the opposite effect, with the dollar continuing to strengthen in response. New tariffs, for instance, could prompt a sell-off of the target country's currency—this happened in 2018 when President Trump initiated trade restrictions on China, pushing the renminbi down about 10%. Given this uncertainty, it's likely hard to predict the trajectory of gold bullion and futures prices.

Gold Miner Stocks

Individual gold miner stocks—including major players like Newmont Corp. NYSE: NEM and Barrick Gold Corp. NYSE: GOLD as well as junior miners such as over-the-counter play Dryden Gold—are impacted by the price of gold, but there are also many other factors that affect these companies.

Many leading gold miners dropped alongside the price of gold during November but have so far failed to recover alongside the metal itself. NEM shares, for instance, are down about a quarter in the last 30 days.

Investors may see some of these gold stocks as a more suitable way to benefit from a potential future rise in gold prices, as they are still available at a premium relative to their high price tags earlier this fall.

If the depressed share prices are due to other factors—governmental regulations at mining sites, increased production costs, or a host of other concerns—there is no guarantee that the price of these stocks will rise along with gold, though.

Gold Mining ETFs

Another access point is via gold mining ETFs, including those focused on mature companies—the VanEck Gold Miners ETF NYSEARCA: GDX, for example—and those targeting junior firms, such as the VanEck Junior Gold Miners ETF NYSEARCA: GDXJ.

GDX is up 30.6% in the last year, just shy of the 30.9% rise in the S&P 500, while GDXJ has climbed by 34.8%.

One benefit to these types of funds is diversification, which may be particularly important given the broad uncertainty in the precious metals space.

While both of the funds above have come up slightly short of the performance of gold futures in the last year, they may entice more investors as buy-and-hold options for their ease of access.