Shares Magazine – August 15, 2019

(Axel Boer) #1

AEQUITAS


32 | SHARES | 15 August 2019


Insightful commentary on market issues

A


merica’s headline S&P 500 stock index
continues to swing around as bulls and
bears grapple for supremacy – and while
they are slugging it out gold is quietly doing the
business for investors.
The S&P 500 is up by barely 2% over the past
year, while gold is up by a nearly a quarter and a
leading index of 15 gold miners is showing gains of
nearly 40%.
Those figures are in dollars, so the capital gains
for UK-based investors who will be looking at their
returns in sterling are even better, thanks to the
weakness of the pound. (See table below).
Gold’s latest gains are also particularly notable,
because they are coming when the dollar is gaining
too. The trade-weighted DXY (or ‘Dixie’) dollar
index is trading near 98, despite a US Federal
Reserve interest rate cut and the attempts of an
irate president to talk (or tweet) down the buck.
Normally a rising dollar signals weakness in
gold, as it makes the metal more expensive to buy.
But they are gaining in tandem, which suggests
that investors are nervous and may be looking
for potential bolt-holes in preparation for more
difficult times.

TUG OF LOVE
The S&P 500 may be trading near its all-time
highs, set just above 3,000 mark in late July, but it
is making heavy weather of forging decisive gains,
as the benchmark is no higher than it was in mid-
January 2018.
This due to a tug-of-war between supporters
and sceptics of US stocks. Buyers believe that the
US Federal Reserve’s move to cut interest rates will
stoke further economic and corporate earnings
growth. Sellers are countering that a downturn

Why the precious metal has been to the fore in 2019

Gold shines as


US stocks stumble


S&P 500 Gold


HUI Gold
Bugs Index

FTSE 100


Change over past 12
months in $

2.8% 23.6% 38.3% (11.8%)

Change over past 12
months in £

9.2% 31.3% 46.8% (6.3%)

Source: Refinitiv data

GOLD AND THE DOLLAR ARE
(UNUSUALLY) ADVANCING TOGETHER

Source: Refinitiv data

GOLD HAS BEATEN US EQUITIES
HANDS DOWN IN THE PAST YEAR
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