Over the past month, gold prices have been moving higher. Both the SPDR Gold Shares GLD and iShares Gold Trust IAU are at their highest levels of the year, and are actually outperforming the S&P 500 since the start of 2017. Gold is now up nearly to 7.5% since New Year’s Day, easily outperforming S&P 500’s 2.4% gain in the same time frame.
Gold, perhaps one of the most stable commodities, is many investors’ favorite when there is uncertainty in the market. The commodity typically moves in the opposite direction of the U.S. dollar, so gold prices rise when the dollar is weak. Though the U.S. dollar ETF UUP has been on the rise in the last couple of days, the dollar has dropped almost 2% since the start of 2017. Gold, on the other hand, has an 8% increase year-to-date.
The main reason for the boost of this precious metal is the uncertainty and risk that people feel from Donald Trump’s presidency and his comments on the dollar. In an interview with The Wall Street Journal, President Trump said that the U.S. dollar is “too strong.” He added, “Our companies can’t compete with them now because our currency is too strong. And it’s killing us.” Following his remark, the dollar saw a 1.3% decline in value.
“There’s still more uncertainty in the administration’s policies,” Phil Streible, a senior market strategist at RJO Futures, said in a phone interview with Bloomberg. Many investors are protecting their money from President Trump’s policies by buying up gold.
Unlike other commodities, such as oil or lumber, that primarily shift with supply and demand, gold doesn’t have a real industrial use, so its value is based on the currency that it’s valued in. Because gold is traded in dollars, the value of gold won’t fluctuate. It is the value of the dollar that changes.
Gold is not the only metal that’s on the rise. Silver Trust SLV saw a little more than 11% gain since the year has started. Silver’s price went up $0.06 today to $17.81 an ounce while gold went up $7.81 to $1,240.97 an ounce
In the near future, investors can continue to expect gold to maintain its momentum if political volatility remains and if the dollar weakens against a variety of other currencies. However, if things calm down and the dollar climbs back up once again, gold and other precious metals will likely suffer. Be sure to follow our Gold Mining Stock overview for updates on how analysts and the overall markets are viewing this important segment.
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SPDR-GOLD TRUST (GLD): ETF Research Reports
ISHARS-GOLD TR (IAU): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
ISHARS-SLVR TR (SLV): ETF Research Reports
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