Gold is benefiting from today’s low interest rate monetary climate, and Russ says its diversifying effects mean the metal can be a valuable risk management tool for investors.
I’am advocating gold as a long-term investment and also as a risk management tool. Today, I remain bullish on the metal for two reasons – the monetary climate and gold’s diversifying qualities.
Gold is up nearly 8% this month, outperforming most equity indexes. Gold – more than any other commodity – is a natural beneficiary of the current monetary regime, which is characterized by negative real interest rates.
Market Realist –
Gold outperformed other assets as investors fear another bout of global slowdown
The above graph compares the performance of spot gold (GLD)(IAU) with the S&P 500 (SPY)(IVV) for the month so far. The S&P 500 has lost close to 2% since the start of the year, whereas gold has returned about 8% to its investors in the same period.
Gold outperformed most global equities (QWLD) as fears of a global slowdown spooked investors. Most developed markets (EFA), with the exception of the United States, are seeing slow growth, especially Europe (EZU).
In addition, political instability in Greece has added to Europe’s woes. This has led to high volatility (VXX) in most markets. Remember, although the US economy is witnessing growth, the stock markets are affected by the goings-on elsewhere since a global slowdown is bad news for exports.
These fears have led to a scramble toward safe havens such as gold and Treasuries (TLT). The ten-year U.S. Treasury is trading well below the 2% mark, close to 1.8%. Recently, treasuries all around the developed world saw their yields battered as investors looked for shelter from risky assets.
When the dollar index is compared to gold prices for the last five years, you can see that gold and the dollar move in opposite directions.
Coca-Cola (KO) impressed investors with better-than-expected revenue and earnings for the first quarter.
Microsoft (MSFT) announced this month that it had acquired a San Diego startup called Express Logic for an undisclosed amount.
Spirit Airlines is scheduled to report its first-quarter results on April 25. The airline has an impressive record of beating earnings estimates.
On April 23 before the market opened, legacy motorcycle maker Harley-Davidson (HOG) reported its first-quarter earnings results.
Williams Companies (WMB) is scheduled to release its first-quarter earnings on May 1 after the market closes.
McDonald’s (MCD) is set to report its first-quarter earnings before the market opens on April 30.