Commodities & Metals
Gold Shines Brighter With Inverted Yield Curve and Weakening Global Growth
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Gold has recaptured its shine. With the overhang and larger media frenzy around bitcoin and cryptocurrencies having witnessed a death of a thousand cuts, the interest in gold has been coming back with a rising price. While the shiny yellow metal itself has risen since the Federal Reserve exited its rate hike game, and with the Treasury yield curve inverting, the move higher has been even better for the gold-mining stocks.
Note that the gold trade being seen is not signaling an overbought basis on some of the chart readings (RSI and MACD), but gold itself is running up close to what was strong resistance a month earlier.
One issue that has changed is the inverted yield curve in the United States, with Fed Chair Jerome Powell and the Federal Reserve’s FOMC now out of the rate hike game in 2019. And former Fed Chair Janet Yellen even opined that the inverted yield curve may be signaling the Fed needs to lower rates late in 2019, rather than the curve indicating that a recession is coming sooner rather than later.
Last week we briefly saw the German 10-year bund dip into negative interest rates again, and Japan’s 10-year yield of 0.10% at the time just doesn’t come close to rivaling the current long-term rates that international buyers can get from the good old U.S. Treasury.
Societe Generale now sees the U.S. falling into a recession in 2020, following excesses of the fiscal package and the damage done by the trade policy after the Treasury yield curve inverted last week. Forbes also noted that the inverted yield curve puts the odds of a recession at just 25% to 30% in the next year.
Here is how some of the top gold plays, including exchange traded funds, have performed of late.
VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) was last seen trading up 1.9% at $23.21 on Monday, which would make for five consecutive days that the larger gold-mining ETF has traded higher. The fund peaked at $23.70 in late February, a 52-week high, and its prior highest close was $23.36 on the same day.
Newmont Mining Corp. (NYSE: NEM) was up 1.5% at $35.03, and its shares are up over 6% in the past five days. Its market cap was $18.5 billion, prior to the Goldcorp merger and prior to a special dividend for shareholders being a step closer.
Barrick Gold Corp. (NYSE: GOLD) was trading up 2.5% at $14.02. It is now worth about $24.5 billion, and its current dividend yield screens at 2.1%.
Wheaton Precious Metals Corp. (NYSE: WPM) traded up 1.6% at $24.89, up over 8% in the past three days.
Royal Gold Inc. (NASDAQ: RGLD), a $6 billion gold royalty and gold interest buyer, was up 1.5% at $93.50, or about 4% higher in the past week. Its dividend yield is just 1.1%, but its quarterly payouts have trended higher in recent years.
NYMEX Gold was last seen trading up 0.4% at $1,320.95 per ounce. Gold’s most recent peak price was roughly $1,345 per ounce for just two days in February. Otherwise, the highs for gold in the past 12 months have been just over $1,350 per ounce last April.
The SPDR Gold Shares (NYSEARCA: GLD), the world’s top ETF for the actual price of gold, was last seen up 0.6% at $124.79. That’s up from $123.04 last Monday. The VanEck Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ) tracks the smaller and more speculative gold-mining players. It can trade with more volatility than its larger miners’ ETFs and than gold itself. With a gain of 1.7% to $33.30 on Monday, the junior miners ETF is actually only up 4% over the past week.
Even silver was rising with gold on Monday, but it has lived up to its nickname of the “devil’s metal” with only a 1.5% overall gain in recent days. The iShares Silver Trust (NYSEARCA: SLV) was up 1% at $14.60.
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