Over 1-in-4 Americans Think Gold Is The Best Long-term Investment Option—Is Gold The Asset To Watch In 2023?

A recent nationwide Gallup poll found that over a quarter of Americans (26%) believe that gold is the best long-term investment available on the market. The percentage of respondents who put gold before all other asset classes nearly doubled in size compared to last year, when only 15 percent favored the yellow metal. 

In fact, gold performed better in this annual poll than it has in eleven years, when it scored 28 percent in 2012. This suggests that Americans have greater confidence in gold than at any point in the last decade—due in no small part to today’s volatile stock market, bank failures, geopolitical risk, high interest rates, and generationally high inflation. 

U.S. perceptions of best long-term investment (Source: Gallup)

Our macroeconomic climate has driven interest in gold to levels rarely seen. In this article, we’ll unpack why gold is enjoying its moment in the sun, where it might be headed in the months ahead, and list a few turnkey assets that can land you high-upside gold market exposure. 

Gold At $2,000 An Ounce: A Sign Of What’s To Come?

At the time of writing, the spot price of gold is about US$1,965 per troy ounce. Earlier in May, the price briefly volleyed to the $2,050 range—flirting with its all-time high of $2,075—following yet another 25 basis point rate hike by the Federal Reserve. 

However, gold prices simmered later in the month as systemic concerns regarding the integrity of the banking sector were assuaged by reassurances from the Fed. By the end of the month, a resolution in principle was reached to end the federal debt ceiling crisis precipitated by budgetary disagreements between the Democrat-controlled White House and the Republican-controlled House of Representatives. These events added a modicum of certainty back into financial markets that ultimately restabilized gold prices back to the mid-$1,900s. 

It remains to be seen whether we’ll continue to see gold eclipse the elusive $2,000 mark throughout the rest of the year. But forecasts indicate a large potential variance, with a major Reuters poll indicating an average of $1,745 (-11.25%) while some market watchers, like Swiss Asia Capital, predict a ceiling of $4,000 per ounce. 

Gold’s Performance Hinges On A Weak Dollar

The strength of the U.S. dollar generally inversely correlates with the price of gold. Since gold is denominated in U.S. dollars, and is often used as a hedge against currency fluctuations, its attractiveness as an investment tool tends to decrease as the dollar rises in value. 

A weaker dollar, then, requires fewer dollars to purchase the same amount of gold—thereby increasing demand for the yellow metal, particularly among investors holding other currencies. 

Correlation between the DXY and the price of gold (Source: Reuters)

As displayed above, gold and the U.S. dollar have seen a rigid inverse correlation in recent years. This association has continued into the present day. In fact, the U.S. Dollar Index (DXY)—a measure of the U.S. dollar against six competing currencies—rose by 2 percent between mid-April and May. Over the same period of time, gold prices fell by 3.25 percent. 

It’s likely that we will continue to see this trendline expand throughout the year—with the dollar rising and gold falling—if interest rate hikes continue to occur. Throughout the Fed’s hawkish monetary policy campaign from 2021 on, the dollar has strengthened relative to other currencies. Should the Fed’s campaign end, we could see the reverse happen, where the dollar slides and gold prices regain ground. 

Gold Asset Options For Investors

Those interested in gaining exposure to the gold market have a few options. Below, we’ve listed the main asset classes typically sought after by gold investors. 

• Physical gold bullion: Tangible assets that are held in registered depositories and vaults by third-party custodians. 
• Gold futures: Standardized, exchange-traded contract in which a buyer agrees to purchase a specified quantity of an asset at a specified price at a predetermined later date. 
• Gold mining and exploration stocks: Publicly-traded securities representing share ownership of individual companies whose activities involve gold. This can include gold mining, gold deposit exploration, or gold selling.
• Gold ETFs: Exchange-traded funds that can be sold or traded like stocks but include a bundle of diversified or concentrated stocks within the gold sector. 

Each asset type has its share of benefits over the others. For example, gold bullion benefits largely from security and price stability, making it an ideal choice for long-term investors. 

By contrast, the liquidity of paper-based gold assets, such as gold mining stocks, ETFs, or futures contracts, makes these more suitable for intra-day traders looking to capitalize on short-term price movements. 

Gold Stocks To Watch In Q3 2023

For traders and short-term investors, there are many publicly-traded stocks and ETFs that offer excellent exposure to the gold market. Below are a few gold stocks that could make worthwhile additions to your portfolio this year. Make sure you consult with a licensed financial professional before making any investment decision. 

3. Rio Tinto Group RIO

• Exchange: NYSE
• Current Open: $64.69
• Market Cap: $104.81B
• PE Ratio: 8.48

Trading around the $65 mark is Rio Tinto Group, a leading global mining and metals company that offers attractive investment opportunities for investors. Rio boasts diversified metals exposure in gold, iron ore, aluminum, copper, and diamonds, in addition to a robust supply chain. 

Rio Tinto’s solid financial performance, extensive reserves, and strategic partnerships position it well to capitalize on growing demand for essential metals and minerals in emerging markets. 

2. Newmont Mining NEM

• Exchange: NYSE
• Current Open: $41.46
• Market Cap: $32.95B
• PE Ratio: N/A
• Annual Dividend Yield: 5.07%

Noted for its sustainable mining sites in the United States, Australia, and Ghana, Newmont Mining is a global gold exploration and production company with massive exposure in established and emerging markets. 

With a strong eye for operational efficiency and cost management, Newmont is a bonafide leader in the gold mining space across multiple jurisdictions. This reduces geopolitical risk and leads to longer growth potential. 

3. Agnico Eagles Mines Limited AEM

• Exchange: NYSE
• Current Open: $51.28
• Market Cap: $25.74B
• PE Ratio: 10.03

Agnico Eagles Mines is one to watch in 2023. With a diverse portfolio of mines in Canada, Finland, and Mexico, their geographical diversity and solid track record of financial performance make it a suitable option for gold investors in the year ahead. 

Agnico is committed to maximizing shareholder value through disciplined cost management and efficiency while rewarding its investors with a 3.1% dividend. With earnings sharply on the rise in recent years, Agnico’s stock price could be undervalued at present. 

The Yellow Metal Set To Shine In 2023?

How gold performs in 2023 will likely be a function of upcoming monetary policy, the relative strength of the U.S. dollar, and general public sentiment on the economy. Regardless of the direction that gold takes in the year ahead, it might be in your interest to take a position in gold to reduce your exposure to stock market volatility and other risks inherent to conventional markets.

Note that mining stocks can be a high-risk investment choice. This asset class is best avoided if you’re looking for a safe, hands-off investment—something that often appeals to traditional gold investors. To steer clear of mining stock volatility, consider opting for physical gold bullion products instead. Gold bullion can be added to your IRA or 401(k) as a long-term store of value, all while capturing the unique tax advantages of these retirement accounts. 

Disclaimer: This article does not constitute financial advice. Speak to your licensed financial advisor before making any investment decision. The author does not own any securities mentioned in this article, nor does he own a financial position in gold assets.