Gold Price Shines Bright...For Now
New York (Mar 12) Gold futures reached a 13-month high this week. But are gold's days at $1,000-plus per ounce numbered? Gold is the glittering comeback kid of 2016. The precious metal has climbed around 20%, making it the best-performing major asset of the year so far.
This has, of course, been a boon for gold investors. As one example, the triple-leveraged (meaning its gains and losses are thrice that of the underlying index) Direxion Daily Gold Miners Index Bull 3x Shares ETF (NYSEARCA:NUGT) is up roughly 160% since the beginning of 2016.
And we saw a new high for gold this week. After initially falling following the European Central Bank's announcement that it plans to cut key interest rates and increase quantitative easing (QE), gold futures were up again by market close on Thursday. MarketWatch reports gold for April delivery closed at $1,272.80 an ounce, the highest level since February 2015. By Friday, gold was down 1% to $1,259 an ounce as stocks rebounded in the wake of the ECB's stimulus measures.
Gold is often viewed as a safe-haven investment amid market turbulence, a condition that has been all too familiar to investors this year. Often, when the stock market is down, gold is up, and when stocks rally, gold falls (although this is not always the case, as demonstrated by gold's performance since mid-February - up 6% - while the S&P 500 climbed 10%).
The bullion fetched a record $1,921.41 an ounce in 2011 as fears of a global downturn mounted, buoyed by concern over Japan's likelihood of entering a double-dip recession. 2011 was another volatile year for U.S. stocks, particularly after August's first-ever S&P downgrade of U.S. debt.
But gold's glory was relatively short-lived, and the precious metal posted annual declines from 2013 through 2015, as the equities bull run continued. Between April 2013 and August 2015, physical gold bullion funds lost over $52 billion in value. And while gold was in a bear market in 2014, stocks were in a bull market through the end of the year: the Dow Jones was up 7.5%, the S&P 500 was up 11.4% and the NASDAQ was up 13.4%.