Undervalued and Overvalued Assets and Their Impact on Gold
According to a regular survey of fund managers at Bank of America Merrill Lynch, a net 34.0% of the respondents saw equities (SPY) (SPX-INDEX) as overvalued. That’s the highest level in the survey’s history, which spans 17 years. The respondents also thought the US dollar (UUP) was the most overvalued since 2006. The United States has been identified as the most overvalued region, with 81.0% of the respondents thinking the same.
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Is gold undervalued?
In the survey, which was conducted in February 2017, a net 15.0% of respondents said that gold was undervalued. That’s the second time investor sentiment has reached that level since January 2008. The main concerns respondents shared were growing protectionism concerns, rising inflation, and stagflation fears.
While these factors remain in gold’s favor, investors are still not putting huge amounts of money into gold. They’re most likely concerned about the newfound optimism in the US economy.
Your gold investments
If there’s an upside to gold, gold equities could outshine gold due to their leverage to gold prices. Gold miners such as Iamgold (IAG), AngloGold Ashanti (AU), and Coeur Mining (CDE) provide leveraged exposure to gold prices. Together, they contribute 4.6% to the price determination of the VanEck Vectors Gold Miners ETF (GDX).
More aggressive investors, on the other hand, might invest in more leveraged gold ETFs such as the Direxion Daily Gold Miners Bull 3X ETF (NUGT) or the Direxion Daily Junior Gold Miners Bull 3X ETF (JNUG).