The price of gold has been breaking out to new all-time highs in recent sessions, thanks in part to rising question marks over President Trump’s tariffs. With a 30-day pause on tariffs in place, we may have enough time for negotiations to avoid what could be a nasty, lengthy tit-for-tat trade war.
Undoubtedly, a pause may have provided a bit of relief for the Canadian dollar and the TSX Index, which bounced back intraday on Monday’s trading session. Still, we still have no idea what the near-term future holds. While we can certainly hope for the best (no tariffs), investors should always be ready to keep on rolling with the punches.
Even if Canada and the U.S. can reach a deal that implies no tariffs on either side, there’s still a haze of uncertainty surrounding Trump’s tariffs on China and even the European Union. In light of such profound unknowns, I’d argue it’s only wise to be ready for anything, including another wave of inflation and potential disruption to the ongoing bull market in stocks. While I wouldn’t sell stocks or overreact by shifting into bonds or other lower-risk securities, I do think that forming a personal gold reserve of sorts can help weather a volatility storm and a potential return of inflation.
Either way, I still like the risk/reward for gold, even after coming off one of the best years of gains in recent memory. In short, forming a foundation of gold at your portfolio’s core could make your portfolio better able to withstand a highly uncertain market environment – one that could allow gold to keep shining for longer.
For Canadian investors, there are ample ways to bet on a continuation of gold’s run. And in this piece, we’ll run by two different ways to bet on the shiny precious metal in these most uncertain of times.
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Sprott Physical Gold ETF
You can’t beat the Sprott Physical Gold Trust (TSX:PHYS), a close-ended fund (CEF) that’s currently going for a mild discount of around 1.5% to its net asset value (NAV). Undoubtedly, if you’ve invested in a CEF, you’ll know that this discount can fluctuate wildly. And while a pullback in demand (and prices of gold) could bring forth a discount closer to 3%, I’d much rather be a systemic buyer of physical gold at these prices while we’re in the early innings of what could be a dragged-down trade spat.
From a longer-term perspective, I view gold as a safe haven asset that investors should embrace, especially if tariff talks escalate and the economy starts to feel the heat of tariff-related price increases again. In any case, PHYS shares are one of my favourite ways to bet on the physical metal itself. It’s a solid and relatively affordable (around 0.41% management expense ratio) option for Canadians to build their reserves.
Agnico Eagle Mines
If you’re looking to play the upside rather than dampening potential downside in the event of a market pullback, a solid miner like Agnico Eagle Mines (TSX:AEM) may be a better bet. It’s a more volatile, riskier option than physical gold. However, as one of the best-run miners out there, I do think more aggressive investors would get better mileage from the name if gold continues heating up through the year.
At $138 and change, AEM stock boasts a 1.7% dividend yield and a 17.3 times trailing price-to-earnings (P/E) multiple. That’s cheap for a stock that soared more than 114% in the past year! I think there’s more to come (dividends and gains) for those who stand by the name.
