Gold at a five-year high

Gold’s rise to its highest price in more than five years showed central-bank policy changes “may be starting to have unintended consequences in asset markets,” according to Michael Shaoul, Marketfield Asset Management LLC’s chief executive officer. Gold for immediate delivery traded Thursday for as much as $1,394 an ounce, surpassing the high end of its trading range since October 2013, according to data compiled by Bloomberg. The precious metal rose after the Federal Reserve and the European Central Bank pointed toward interest-rate cuts.

** 4 years later  (Feb 2023) **

Gold's gain signals the U.S. looks riskier to investors

Gold’s performance is an indication that “the U.S. is perceived to be riskier than other countries,” Richard Bernstein, chief executive and chief investment officer at Richard Bernstein Advisors LLC, wrote in a report this month. He cited a contrast between the precious metal’s price in dollars, which rose 13 percent for the year through Friday, and in euros, which dropped 0.6 percent. Although gold climbed in yen, Swiss francs, British pounds and Australian dollars this year, the gains were smaller than those in dollar terms, according to data compiled by Bloomberg.

Gold miners : some notes and observations

In 2014, shares of precious-metal mining companies have been leading the gold price. 

That's different from what we saw in the past couple of years. The gold price outperformed the shares going into the peak in 2011 and through the remainder of that year. Now we are seeing the gold shares outperform the metal price. That typically is characteristic of better things to come.

• All markets are forward looking, so if the stock market is anticipating a better gold price, the shares are going to do better than the gold price at the beginning of an upward move. In contrast, when the price of gold continued to make new highs in 2011, it was front-page news. And yet the shares lagged conspicuously. That was a sign that the move in the gold price wasn't going to be sustained.
• Mining shares are highly leveraged to the gold price because of marginal economics. If the price of gold goes up 10%, that might mean the profitability of mining gold goes up 25%. Every company is a little different. In a way, mining shares are options on the gold price.

GLD vs SPY performance (Feb 2014)

GLD vs SPY 5 years

GLD vs SPY 2 years

GLD vs SPY 1 year