GOLD IS HAVING A GREAT RUN AND SO ARE GOLD STOCKS / BARRON´S MAGAZINE

Gold Is Having a Great Run and So Are Gold Stocks

By Randall W. Forsyth


Photograph by Carla Gottgens/Bloomberg


Gold prices on Tuesday staged their biggest gain since last November, with Comex futures jumping $22 an ounce, or 1.67%, to $1,340. Since its recent low on Jan. 24, the yellow metal was up 4.77%, and up almost 14% from its 52-week low on Aug. 16.

Gold mining stocks, as usual, outpaced bullion. The VanEck Vectors Gold MinersETF (ticker:GDX), which tracks the big miners, jumped 3.17% on Tuesday, to $23.14, just shy of its 52-week high. The more volatile VanEck Vectors Junior Gold MinersETF (GDXJ) popped 4.22%, also within a hair of its yearly high.

Gold’s advance has come in the face of the continued rally in stocks and other risky assets—instead of moving in the opposite direction of those investments. Since Barron’s first noted the nascent strength in the metal last September, gold is up from around $1,200 an ounce.

Trey Reik, senior portfolio manager at Sprott Asset Management, says gold’s steady rise reflects the market’s recognition that the Federal Reserve will not raise interest rates further and will end the contraction of the balance sheet. He contends gold investors anticipated the central bank’s pivot, first enunciated by Fed Chairman Jerome Powell on Jan. 4. Since then, both financial assets and gold have been lifted by the Fed’s pause.

In addition, Reik said, given the much smaller size of the markets for gold and mining stocks, it doesn’t take more than a few money managers adding a bit of these investments to their portfolios to give bullion and gold stocks a lift.

Finally, the dollar has been easing after having initially rallied in tandem with the U.S. stock market since the end of 2018. Despite rising concerns about Europe’s economy and Brexit, the U.S. Dollar Index(DXY) fell 0.4%Tuesday. At the same time, bitcoin is showing a sudden revival, briefly topping $4,000 Tuesday. Over the past two days, the cryptocurrency is up over 7%. Both gold and bitcoin can be viewed as alternatives to paper currencies.