LAWRIE WILLIAMS: Gold’s 2015 performance far better than generally believed

The past week has been an interesting one to say the least for both stock markets and gold.  While in general markets have recovered at least part way from the long succession of sharp falls which appear to have been initially triggered by the Chinese yuan devaluations, gold perhaps also performed rather less well than the pro-gold investment community would have liked, much to the glee of the anti-gold naysayers.  But then perhaps it didn’t perform quite as badly as many would have you believe – very much the story of gold over the year to date. 

In U.S. dollars, for example,  at the time of writing gold is currently only down 4.6% from its opening LBMA morning gold price on January 2nd, while the Dow is down 7.4% over the same period even after its recent sharp recovery.  In the UK the FTSE 100 is off 5.4% year to date.  Thus gold has actually outperformed major U.S. and UK stock indexes over the period.  Reading most media headlines on gold one would have been hard pressed to believe this to be the case!

And in other key markets like Australia and Canada, the gold price has actually risen quite decently over the year to date, while local stock market indexes have tended to fall alongside many of the other global indexes.  In Canada, the TSX Composite Index for example is down 6.7% on the year, while gold is up 7% in Canadian dollars.  Australia’s ASX 200 is off 3.7% while the AUD gold price has also risen by 7%.  So has gold’s performance been as dire as its detractors would have us believe?

Even in China the hugely volatile Shanghai Composite index is actually down year to date 3.8% and although gold has also fallen in yuan, it has only done so by 3.1% - so again it has outperformed the stock market (just) which surely will not go unnoticed by the Chinese populace with its apparently continuing thirst for gold - withdrawals out of the Shanghai Gold Exchange so far this year are comfortably at record levels.    Chinese gold demand has been the world leader for the past three years – possibly for longer as there is considerable disagreement in the definition of what really represents Chinese consumption.

We are currently seeing almost unprecedented volatility in global stock markets, but there is far less so in the U.S. dollar price of gold regardless of the impression one may get from the media.  Gold may be weaker year to date in U.S. dollars, but it is not in most other currencies, and even in the USA it has performed better year to date than the stock market.  That to this writer suggests that as a wealth protecting investment it has actually done reasonably well so far this year in comparison with global stock markets.  Indeed if we’d taken stock market values at the height of the crash a few days earlier, gold’s relative performance would have been sharply better still.   Meanwhile, gold’s downside would now appear to be relatively limited while in the stock markets, following their recent dives and subsequent recovery -  who knows?

 

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28 Aug 2015

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com