Are Gold Investments Lucrative After the Yuan Devaluation?
The devaluation of the yuan last week triggered turbulence among Asian stock markets. The Indonesian rupiah, South Korean won, Thai baht, and Malaysian ringgit also significantly fell. The concerns of a probable free-fall in the Chinese currency have likely eased since the Chinese yuan renminbi surged ~0.12% on Friday. A surge in the yuan led to the precious metal price declines of 0.26% and 1.21% in gold and silver, respectively.
Rate hike expectations and their likely positive outcome for the US dollar sent jitters to gold investors and sent prices tumbling. Also, the weak data on gold reserves in China could mean an adverse outcome for the precious metal.
The SPDR Gold Shares ETF (GLD) and iShares Silver Trust (SLV) have seen positive five-day trailing returns. The returns for these ETFs were 0.26% and 0.55%, respectively, on Monday. The Market Vectors Gold Miners (GDX) was up 3.8%. Gold futures on Comex have a 30-day trailing loss of 1.2%, but last trading week was positive, and they surged 0.97% on a five-day trailing basis. The chart below shows the gold futures traded on COMEX versus the GDX Miners ETF’s performance over the last month.
Hedge funds’ optimism over gold
Other news gripping the markets surrounds Stanley Druckenmiller of the famous Duquesne Capital Management, which converted to the Duquesne Family Office. He has purchased almost 2.9 million shares of the SPDR Gold Shares ETF (GLD). Following the GLD purchase, Druckenmiller’s gold holdings constitute approximately 20% of this total portfolio’s investments. Similarly, other hedge funds like the Three Mountain Capital also seem to be tilting toward a gold safe-haven provision. Due to the turbulent equity and currency markets worldwide, precious metals look attractive.
Investments in mining companies
Mining companies Yamana Gold (AUY), Goldcorp (GG), Helca Mining (HL), and Anglogold Ashanti (AU) gained 5%, 4.06%, 3.23%, and 7.68% respectively. Most mining companies surged on Monday, owing to the likely delay in interest rates for the United States and an overall weak outcome. These companies together contribute 17.37% to the Market Vectors Gold Miners ETF (GDX).
Browse this series on Market Realist: