The final quarter of 2011 is one that Gold investors would like to forget. SPDR Gold Shares (GLD) was down over 5% in the last three months of the year compared to a 15% gain for the SPDR S&P 500 (SPY) over the same time period.
As investors abandon stocks and precious metals, the US dollar has rallied. The PowerShares DB US Dollar Bullish Fund (UUP) is up over 3% in the past 3 months compared to a 11% decline in equities over the same time period.
Last week’s swoon in the equity markets was accompanied by another strong performance by gold. The last peak for stocks was on July 7 when the S&P 500 ETF (SPY) closed above $135. Since then, stocks are down over 11%.
As the US continues to wrestle with fiscal policy and the EU debt crisis remains unresolved, investors have been returning to gold to ride out the uncertainty.
After a dramatic 8 week run-up in silver prices, the bubble burst last week on a sudden strengthening of the dollar. Since March 1, the iShares Silver Trust (SLV) gained nearly 40% before rapidly returning to early March levels in less than a week.
Gold took a sharp move down last week reaching levels not seen since early December. The SPDR S&P Gold ETF (GLD) closed the week at $133.58, down nearly 4% from its high on December 31 before bouncing back slightly in today’s trading.
While the European debt crisis continues to take a toll on the Euro, investors have been pushing up the price of gold. The Euro hit a four year low yesterday with the CurrencyShares Euro Trust (FXE) trading as low as $122.47 yesterday before closing at $123.48.
Investor interest in gold has lead the price of the precious metal and related ETFs to new highs. The largest gold ETF, SPDR Gold Shares (GLD), is up 35% on the year with the latest up-leg beginning in mid-August.
Gold is back. After a summer lull, gold’s three week run has it topping a $1,000 per ounce, an 18-month high. SPDR Gold Shares (GLD) is up over 6% in the past three weeks.
The prospect for a resurgence in inflation looks high. The aggressive policy responses put in place around the world to deal with the financial crisis combined with the emerging green shoots that signal a fading recession have investors concerned with how to protect their assets in an environment of rising prices.