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Gold Has Beaten the Market Over Multiple Time Periods

Commentaries & Views

gold has beaten the S&P 500 Index so far this century
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Global uncertainty made gold a holiday winner for investors seeking a relatively safe haven. U.S. stocks just logged their worst year since 2008—their worst December since 1931—as fears over global trade, ballooning debt, the end of accommodative central bank policy and a U.S. government shutdown unsettled investors. Against this backdrop, the price of gold rallied late in 2018, reversing a trend of negative returns and weak investor demand that prevailed for most of the year.

The yellow metal, after all, has historically had a strong negative correlation with the market. I’m pleased to report that this inverse relationship held firm in 2018, proving again that investors continue to see gold as a valuable asset in times of financial instability. As you can see in the charts below, gold beat the S&P 500 Index for the month of December, the fourth quarter and the year.

gold beat the S&P 500 Index for the Month of December
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gold beat the S&P 500 index for the fourth quarter
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gold beat the S&P 500 Index for the year
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With stocks down, gold’s outperformance shouldn’t come as such a shock to most readers.

What might surprise you is that the precious metal has also beaten the market for the century, 345.39 percent versus 70.62 percent, since December 31, 1999.

This tells me that, even though gold is still down from its 2011 peak, investors continue to value it as an attractive store of value.

Strong Gold Investment on Heightened Stock Volatility

Indeed, gold bulls added substantial positions to ETFs backed by bullion in December as the metal headed for its biggest monthly advance in two years. Gold-backed ETF holdings surged by more than 100 tons between October and December, helping to boost prices even further. During last Thursday’s trading session, ETFs bought 662,080 troy ounces of gold, the biggest one-day increase in at least 12 months, according to Bloomberg.

gold is on track for its biggest monthly advance since January 2017
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Quincy Krosby, chief market strategist at Prudential Financial, explains why this buying is no fluke. Speaking to Bloomberg, she said that “the market is questioning whether the [Federal Reserve] is making a policy mistake, and that could not only lead to slower growth, but perhaps to a recession.” Krosby went on to say that when you see this heavy selling in equities, “it’s indicative of fear, and gold [historically] becomes [favored as a relatively] safe-haven allocation.”

Gold Miners Ended the Year on a High Note

It wasn’t just bullion that had a good quarter. Precious metal miners, as measured by the FTSE Gold Mines Index, gained a remarkable 15.85 percent in the three months ended December 31. Among the leaders in 2018 were Nevsun Resources, up 106 percent for the 12-month period; Kirkland Lake Gold, up 81 percent; SSR Mining, up 45 percent; and North American Palladium, up 38 percent.

So should you consider exposure to the gold market?

I believe a good way to participate is with our gold fund, the Gold and Precious Metals Fund (USERX),which provides access to producers with well-established mines. I’m thrilled to tell you that the fund, managed by precious metals expert Ralph Aldis, holds a four-star rating overall from Morningstar as of September 30, 2018. USERX also holds a four-star rating for the three-year, five-year and 10-year periods.  

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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