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Barron's: Gold, Mining Stocks Continue to Glitter

Barron's: Gold, Mining Stocks Continue to Glitter

By    |   Friday, 15 February 2019 02:14 PM

Barron’s said that it isn’t too late to jump on a golden opportunity to add the precious metal to your portfolio.

Barron’s in September suggested it was time for investors to add gold to their portfolios. Barron’s said since that story, gold has gained nearly 10 percent.

Gold jumped to a two-week high on Friday after weak U.S. economic data boosted expectations the U.S. Federal Reserve would hold pat on monetary tightening, Reuters explained.

Spot gold was up 0.4 percent at $1,317.36 an ounce just after midday Eastern time, having touched its highest since Feb. 1 at $1,319.81. U.S. gold futures rose 0.5 percent to $1,320.60.

Disappointing U.S. economic data followed a spate of weak economic reports from China and Europe. This helped gold hold its ground amid gains in the dollar , which held near a two-month peak against a basket of currencies, and a rebound in global stocks on hopes of a thaw in the U.S.-China trade dispute.

“The world economy is slowing very rapidly and therefore monetary policy everywhere will be eased, so the outlook is a lot more inflationary, helping gold,” Alasdair Macleod, head of research at GoldMoney.com, told Reuters.

Meanwhile, Barron’s said it sees gold’s price continuing to climb because of a variety of factors.

“Investors are worried about a weakening global economy amid potential debt trouble in China and a slowing Europe. Central banks, including the U.S. Federal Reserve, are also backing off plans to tighten monetary policy, which could also benefit gold. Gold has even managed to gain despite a stubbornly strong U.S. dollar,” Barron’s said.

Meanwhile, Barron’s cited G.Research as saying that gold stocks have outperformed physical gold in recent months — since the end of September 2018, gold prices have risen 10%, while the VanEck Vectors Gold Miners ETF (GDX) has climbed 18% — as “miners benefit from the inherent leverage in their business models.”

The research firm mentioned Detour Gold (DGC.Canada), Victoria Gold (VIT.Canada), and Barrick Gold (GOLD) as three examples of stocks which “have benefited from leverage in their business models.”

To be sure, Bloomberg reported this week that China is adding to its gold reserves again, boosting holdings for a second month and reinforcing an outlook from bulls including Goldman Sachs Group Inc. that central-bank buying will likely remain strong this year.

The People’s Bank of China raised holdings to 59.94 million ounces, or about 1,864 metric tons, by the end of January from 59.56 million ounces a month earlier, according to data on the bank’s website. In tonnage terms, it added about 11.8 tons last month after taking in just under 10 tons in December, which was the first time the PBOC had boosted its hoard since October 2016.

China, the top gold producer and consumer, is beefing up holdings amid signs of slowing growth and uncertainty about whether the trade fight with the U.S. will get resolved. Central banks worldwide added the second-highest annual total on record in 2018 as heightened geopolitical and economic uncertainty drove them to diversify reserves, according to the World Gold Council.

“We are not surprised that the gold purchases resumed,” Carsten Fritsch, senior commodity analyst at Commerzbank AG, said in an email. “We were rather surprised that the hiatus took so long. China possesses only a relatively small amount of gold in its foreign exchange reserves. Hence, there is still a need to buy.”

While China’s holdings are the sixth largest by country, they account for only 2.4 percent of reserves, compared with more than 70 percent in Germany and the U.S., WGC data show.

The increases come against a backdrop of rising prices. Gold rose for a fourth month in January, topping $1,300 an ounce, as the Federal Reserve signaled it was done raising interest rates for a while, pivoting away from its bias toward tighter policy. 

Individual investors and funds have also been adding to holdings in exchange-traded funds, lifting the worldwide total to the highest since 2013 amid volatility in equity markets and concerns that the U.S. may face a recession. Last month, ETF holdings increased 70.6 tons, the most since February 2017.

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Barron’s said that it isn’t too late to jump on a golden opportunity to add the precious metal to your portfolio.
barrons, gold, mining, stocks
Friday, 15 February 2019 02:14 PM
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