On Tuesday, gold futures neared a five-month high, with contracts for February delivery rising to $1,288 per troy ounce – the highest level since August of last year. Gold miners, junior miners, and explorers have also posted significant gains so far in 2015.
Gold Rises on Euro Uncertainty
The recent uptick in gold prices is largely due to investors’ growing concerns regarding Europe’s shaky economy. This Thursday, the European Central Bank is slated to meet to discuss implementing an additional bond-buying program, which would be aimed at spurring inflation and hopefully putting the region’s economy back on the road to recovery. Many believe that the euro will weaken in response, causing investors to flock to gold as a safe haven.
Below is a graph of the SPDR Gold Trust (GLD) year-to-date performance. Note that this data is as of 1/20/2015:
So far in 2015, GLD has risen from just under $115 per share to roughly $124 per share, which equates to a 9.2% gain YTD. In 2014, the fund ended the year with a roughly 4.00% loss.
Gold Miners and Explorers Rebound
Gold miners and explorers were some of the worst performing commodity producers last year. Industry giant Barrick Gold (ABX) lost roughly 41% in 2014. Year-to-date, however, the stock has managed to rise over 14%.
Below is a look at three gold producer equities ETFs’ year-to-date performance. Note that data is as of market close on 1/16/2015:
The Junior Gold Miners Fund (GDXJ), which tracks small capitalization companies involved in gold mining, is the best performer in this list, posting a gain of roughly 21%. The popular Gold Miners ETF (GDX)—the large cap fund that features exposure to companies Gold Corp (GG) and Barrick Gold (ABX)—has gained over 20% year-to-date. The Gold Explorers ETF (GLDX) has also exhibited a significant rebound this year.
The Bottom Line
Gold futures and miners have certainly made a comeback so far in 2015, as investors pile into the safe haven asset class. Investors should note, however, that gold may be in for some volatility as the U.S. and Europe impose diverging monetary policies. If the ECB’s efforts do not stabilize the region as well as the currency, demand for gold and the U.S. dollar (which is also considered a safe haven) may continue to turn higher.
Disclosure: No positions at time of writing.