Nitesh Shah, Director – Commodities Strategist, ETF Securities, has commented on the recent gold rush. “Gold has been one of the best performing assets this year and is up 9.1 per cent year-to-date, compared to S&P 500 (-6.3 per cent) and Bloomberg Commodity Index (-3.2 per cent),” Shah says.
“Volatile cyclical asset performance has driven investors toward the defensive asset, while a weakening US dollar has been supportive for gold’s performance in dollar terms. Although investor fears about weaker real economic data maybe somewhat misplaced, the headlines of weak durable goods orders and below-expectation payroll figures could add to US dollar negativity.
“We believe there will be a brief period in which US dollar will appreciate again as investors realise the their reading of economic data and market volatility does not tally with the Fed’s view that the labour market is tightening and price pressures are mounting. However, once the market and Fed thinking are once again aligned, US dollar will depreciate again (following a familiar historic pattern of selling-off when rate increases crystallise).”