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Why it pays to invest in gold – Morningstar.ca

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Holly Black: Welcome to Morningstar. I’m Holly Black. With me is Kenneth Lamont. He is an ETF analyst at Morningstar. Hello.

Kenneth Lamont: Hello, Holly.

Black: So, one of the areas that you look at is gold, which is typically seen as a safe haven at times of uncertainty or when the stock market is volatile. Why does it typically do well at these times?

Lamont: Well, it’s widely considered to be a currency of last resort. Gold is quite unusual. It doesn’t pay any dividends and that actually holds a little economic value. Of course, we know it can be used in jewelry and other purposes, but primarily, it’s driven by market sentiment and for generations it’s been considered to be an apocalyptic asset, an asset that you would stuff under your bed, save your money when all the walls are falling.

Black: Well, that’s quite the brutal scenario. So, how has that played out this time round? How has gold done in this latest sell-off?

Lamont: Yes, it’s acted as we would have hoped. For a GBP investor at the beginning of the year a gold ETC or the gold index, the gold price is up 15%, more than 15%, while the MSCI World, which is a proxy for the broad equity markets, are down more than 15%. So, that’s a significant difference.

Black: So, the way that investors would access that is rather than going out and buying gold bars, which can be tricky, especially when you’re not allowed to leave your house, is to own one of these exchange-traded funds that tracks the gold price. Are there a couple that you particularly like?

Lamont: Yes, there’s two actually. There’s the Invesco Physical Gold ETC. This just recently dropped its price to just 19 basis points, very, very cheap way of accessing the price of gold. This gold in particular, the product itself is backed by physical gold. For this product, the gold is sitting in JPMorgan’s vaults in London, which is quite pleasing for British investors. There’s something about knowing where your gold is physically stored, which is quite reassuring. There’s another product listed on the LSE, which is the WisdomTree Physical Swiss Gold, which as it suggests, the gold is actually stored in Switzerland. So, if you have a greater trust in the safety of Swiss gold, then perhaps you would be interested in that product.

Black: And it’s amazing, they’re so cheap. I mean, with all of this in mind, does that mean everyone should have a bit of gold in their investment portfolios? Or are there downsides to owning it?

Lamont: Well, there’s no such thing as a perfect asset. As I mentioned before, gold as an asset doesn’t pay any dividends. There’s no income stream from gold. So, really, you’re beholden to the fluctuations in the gold price. There’s no guarantee that the gold price will continue to go up forever. The real strength of gold is its low correlation with other traditional assets that you have within your portfolio. And therefore, it can be used as ballast through time to smooth your returns. The correlations with the broad equity market over 10 years have been slightly negative. But that doesn’t tell the full story. If you look at moments like, as we discussed, moments of market distress, you see a strong negative correlation, which gives a real – it is really useful for, as I say, I think ballast to the portfolio.

Black: Super. Well, thank you so much for your time. For Morningstar, I’m Holly Black.

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Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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