Buy, Sell, or Hold GLD at Current Prices? Here Is What JPMorgan's $6,300 Year-End Target Means for Gold ETF Investors.

Some asset classes are considered safe havens, or destinations that investors turn to during periods of geopolitical or macroeconomic turbulence. Gold, which is an estimated 4.5 billion years old, (yes, billion with a "B") is often a prime hideout when markets turn calamitous.

So, in theory, the start of the now lengthy conflict in Iran should've been an ideal time to own commodity and gold exchange-traded funds (ETFs), such as the SPDR Gold Shares (NYSEMKT: GLD).

Unfortunately, the opposite is proving true. The GLD ETF, the oldest and largest fund in the gold ETF camp, is down 5.3% over the past three months, a period including the start of the war in Iran.

If JPMorgan is right, this gold ETF could soar. Image source: Getty Images.

That's a frustrating state of affairs for some investors. After all, not only did bullion and related ETFs falter when a war broke out, but the commodity also slid as rising oil prices reignited inflationary pressures. Historically, gold is an inflation-fighting asset. In other words, the commodity has betrayed investors on two fronts this year.

Understanding bullion's weakness and that of gold ETFs in this specific inflationary environment, which is hopefully fleeting, isn't difficult. It boils down to surging oil prices spooking market participants about the Federal Reserve's ability to lower interest rates. The higher bond yields are, the less appealing gold and ETFs such as the SPDR fund become, because these assets don't pay coupons or dividends. The only "income" investors earn comes from selling bullion or a related ETF at a profit. Still, there are credible reasons why the SPDR Gold Shares merit examination today.

A big bank is bullish on bullion

In Goldfinger, the third installment in the James Bond franchise, villain Auric Goldfinger told 007 he'd been in love with gold all of his life. Investors don't need to reach that level of infatuation with the SPDR ETF, but they ought to consider what some big banks are saying about the commodity.

Count JPMorgan among those firmly in the bullish-on-bullion camp. The bank sees gold ascending to $6,000 to $6,300 per ounce this year. Let's split the difference on that forecast, calling it $6,150. That implies significant gains from the $4,740-per-ounce level where gold traded on Friday, April 24. Translation: The SPDR fund would certainly be among the commodities ETFs benefiting if gold gets anywhere close to JPMorgan's forecast.

The path to gold getting there, and thus upside for the SPDR ETF, is plausible. Yes, about half of global gold demand is still tied to jewelry consumption, but new investors should dig deeper and realize that the bull case for the yellow metal is supported in large part by global central banks.

Gold purchases by those monetary authorities hit record levels in 2022, continuing at brisk paces over the next two years before cooling off a bit due to surging prices in 2025. Emerging-market central banks are major buyers of bullion, and JPMorgan estimates that 43% of 73 marquee central banks will increase their gold purchases over the next year. This implies that while gold and the SPDR ETF won't move up in a straight line, some "smart money" market participants see value in the commodity.

The Midas touch for diversification

Working on the premise that even the low end of JPMorgan's forecast comes into play at some point this year implies significant upside awaits the SPDR Gold Shares and its counterparts. Still, there are other reasons to consider this ETF, with diversification being at the top of the list.

Frequently, investors construct portfolios with different asset classes to achieve diversification. For example, they'll add Treasury bond ETFs to equity-heavy baskets, thinking they're suddenly diversified. However, diversification isn't always achieved through different assets. The key is building a portfolio with assets that don't behave similarly.

This is what the pros call correlation. True diversification is attained when a portfolio's holdings aren't joined at the hip in terms of behavior. That highlights the appeal of the SPDR Gold Shares because, dating back to the 1970s, gold's correlations to the S&P 500 and the Bloomberg U.S. Aggregate Bond index are negligible, confirming this ETF is a legitimate diversification tool and a "buy" as well.

JPMorgan Chase is an advertising partner of Motley Fool Money. Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.