After selling-off as interest rates spiked following the election, gold has made something of a comeback in 2017. Gold is up over 9% YTD compared to about a 6% gain in the S&P 500. The rally in gold seems at odds with the prevailing sentiment in the stock market. Stock market investors are bullish. The Dow has been up for ten consecutive days. Gold and stocks don’t often rise in tandem like they have over the last two months.
Is gold trying to tell us something? Is calamity on the horizon? Are rising gold prices a signal that goods inflation is about the rear its ugly head? Is the growth acceleration that has been baked into stock prices unlikely to materialize? Is gold telling us that the dollar has peaked? Maybe it is China or the prospect of a euro breakup that is pushing gold higher.
It isn’t yet apparent what is driving gold, but you don’t have to know the why to be happy that you hold some gold in your portfolio. Gold should be owned as an insurance policy of sorts. You hope you never need it, but if you do, you’ll be delighted you own it.
Jeremy Jones, CFA
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