Gold bars on Chinese yuan bill banknotes background.
So far in this trade war, there is one “winner” left on the board: gold. The barbarous relic has glittered amidst the financial carnage.
And while everyone is climbing aboard now, we contrarians see a better buy window ahead. Below, we’ll “dig into” 4 tickers to get ready, ranked from worst to first (hint: our top play has a dividend that soars with gold prices).
Before we get to that, though, let’s look at what’s really going on here—starting with Treasuries. Yields on the 10-year spiked from sub-4% to 4.5% in a matter of days at the height of the trade war tantrum. They’re still hovering around 4.3% as I write this.
That is curious behavior for the benchmark yield, given we’re seeing more and more signs of an economic slump—and yields usually fall when slowdown fears rise.
The 10-year yield’s pop sure got the administration’s attention: Trump loosened tariffs each time it ticked higher.
When it comes to the bond market, the “Ragin’ Cajun,” James Carville, said it best:
“I used to think if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.”
Turns out the main seller of Treasuries this time around was China, which began not-so-quietly offloading some of its $760-billion stockpile.
China Buys Drive a “Sugar High” in Gold
What does a sovereign buy with a few billion suddenly-freed-up dollars? Gold.
Truth is, China has been snapping up the yellow metal for a while now: According to The Economic Times, Goldman Sachs (GS) reported that China bought 50 metric tons in February, bringing its total reserves to 2,292 metric tons, or about 6.5% of its total reserve assets.
With America hitting China hard with tariffs, and China having the ability to nudge Uncle Sam’s borrowing costs higher by selling its Treasury hoard, its pivot to gold makes perfect sense.
No wonder the yellow metal has been the only green on the screen lately, rallying above $3,300 per ounce. And now everyone is bullish.
We agree with the buy case, but the unanimity about gold gives us pause. Popular trades make us contrarians nervous, so we’re not chasing gold—but another dip will come.
In fact, it may come sooner than later, as gold has fallen off a bit since Trump said he’ll likely cut the China tariffs and Treasury Secretary Scott Bessent, who’s openly said he wants lower Treasury rates, called the trade war with China “unsustainable.”
While we wait, let’s build our watch list so we’re ready when gold’s next drop comes. Here’s how to do just that, with each play ranked from worst to best:
Gold ETFs: Not Bad (But No Dividends)
The go-to gold ETF, the SPDR Gold Shares (GLD), tracks the price of gold bullion, less expenses, and boasts a fee of about 0.40% of assets.
That fee is not bad—it’s cheaper than what you’d pay (in terms of cost and hassle!) to store bullion yourself. But it’s still high when you consider the small amount of work needed to run an ETF like this—the S&P 500-tracking SPDR S&P 500 ETF Trust (SPY), by contrast, has a fee of just 0.09%.
Nonetheless, if you’re looking for an easy way to track gold, GLD works. But we income investors demand a dividend, so we’ll take a pass here.
Gold CEFs: Better Than ETFs, But “Pure Plays” Are Scarce
On the closed-end fund (CEF) side, two tickers stand out, starting with ASA Gold and Precious Metals Limited (ASA), which invests in miners of gold and other precious metals. It can also hold physical gold, platinum and the like.
This one holds miners mainly incorporated in Canada (82%) and Australia (13.5%), but they’re mostly small firms, with 26% of the portfolio in explorers, rather than producers. As it’s a CEF, we can buy it at a discount to net asset value, or NAV, currently 11.8%).
The fund has outrun GLD over the last decade, but it’s been way more volatile, as you’d expect from its more speculative portfolio:
ASA Total Returns
What’s more, the dividend is pretty much non-existent (around 0.1%). And while that 11.8% discount sounds good, it never closes.
Nonetheless, if you’re looking to beat gold prices over the long run, don’t mind exposure to precious metals beyond gold and are okay with more volatility, ASA could work for you.
Next up from CEF-land is the GAMCO Global Gold, Natural Resources & Income Trust (GGN). This one does solve our income problem, with an 8.4% yield.
But it isn’t a pure gold play, either, with a bit more than half the portfolio in mining stocks—including gold and non-gold plays like iron miner Rio Tinto (RIO). A third is in energy stocks.
Moreover, GGN isn’t cheap, with a 1.4% discount that, like ASA’s, rarely moves much.
Finally, GGN is a chronic gold laggard: It’s up about 16% this year, compared to 25% for the gold-tracking ETF.
Which brings us to …
Dividend-Paying Gold Stocks: Our Top Play
Our best move to play a further dip in gold prices is through dividend-paying gold miners like Newmont Corp. (NEM). That’s especially true if energy prices remain low, cutting these companies’ costs.
That was the setup when we bought NEM in my Hidden Yields advisory in June 2023. At the time, gold was around $1,960 an ounce, the WTI oil price was $70, and we saw gold shooting to $2,500 as Jay Powell talked tough on inflation while quietly providing ample liquidity to financial markets.
We could see the effects of Jay’s “Quiet QE” in the bubble in AI stocks and the skyrocketing NASDAQ. These things do not happen when the Fed is clamping down on inflation.
Our gold prediction played out exactly: The Fed eased quietly, then overtly—and gold shot to $2,650, taking miners like NEM higher. A year and a half later, we sold the stock, taking a sweet 29% total return with us:
NEM Total Returns
NEM yields 1.9% today and pays a base plus variable dividend that fluctuates with gold prices. We’re fine with that—if the right buy setup is in place.
The next time a window opens—here I’m talking about a dip in the yellow metal and continued weakness in energy prices—NEM could return to our portfolio. I’ll let Hidden Yields members know when that opportunity shows up.
Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever.
Disclosure: none
