Is Gold on the Go?

TL;DR

Gold has been performing well despite investors' decreased interest in the metal and negative sentiment towards gold mining companies.

Transcript

Welcome To The Man from macro where we look at some of the big themes in today's Global markets this week we're going to take a look at gold which has recently been pressing its all-time highs this is the fourth attempt at these levels and this has happened at a time when investors have become less enthusiastic about the metal and downright hostile... Read More

Key Insights

• ✋ Gold's performance has defied negative sentiment and investor disinterest, reaching all-time highs.
• 🏅 Real yields have a significant impact on gold's performance, with an inverse relationship between the two.
• 😮 Despite rising yields and the strength of the dollar, gold has outperformed expectations.
• 🛀 Gold mining stocks have shown some recent gains, but their long-term performance remains lackluster.
• 🥺 A potential recession and expectations of a Federal Reserve policy reversal could lead to further declines in yields and increased interest in gold.
• 🏅 Silver and its associated mining stocks offer a potentially more volatile investment option related to gold.
• 😑 Implied volatility in gold is relatively subdued, allowing investors to express their views through the options market with limited losses.

Questions & Answers

Q: Why has gold been performing well despite investor sentiment turning negative?

Gold has a substantial inverse relationship with real yields, making it more attractive when yields are low or negative. Additionally, expectations of a potential recession and a policy U-turn by the Federal Reserve have further increased interest in gold.

Q: What is the outlook for gold mining stocks?

Gold mining stocks, particularly the GDX and GDXJ ETFs, have shown some recent gains. While some believe these stocks will continue to disappoint, others are optimistic that a break to new highs in gold could lead to improved performance for these high beta plays.

Q: Will concerns about a recession and expectations for a policy U-turn by the Federal Reserve lead to a further drop in yields?

The possibility of a recession and increased expectations for looser monetary and policy support from the Federal Reserve could lead to a decline in yields. This would be beneficial for gold, as it thrives under loose monetary conditions.

Q: Are there alternative investments related to gold?

Silver and its associated mining stocks have also seen movement, although silver has not yet broken its long-term downtrend. Investors who find gold too early to invest in may consider silver as a more volatile option.

Summary & Key Takeaways

• Gold has reached all-time highs despite investors becoming less enthusiastic and even hostile towards gold mining companies.

• Gold's performance has been especially impressive when compared to real yields, with a strong inverse relationship between the two.

• Despite rising real yields and the strength of the dollar, gold has weathered the storm and outperformed expectations.