The Trend is Your Friend
Gold $Gold - main 2506(GCmain)$ paradoxically often sees bouts of weakness during crashes and crises because folk tend to sell the stronger parts of their portfolios to raise cash and/or rebalance. We have seen some of that happening, but it’s also worth highlighting that although gold is down in absolute terms, its relative performance has been decent…
Gold Gains Ground
Indeed, the gold vs stocks ratio has clearly turned the corner —finally following the lead set by the gold vs cash and gold vs treasuries ratio.
If recession takes hold and the stock market stays in bear market mode, it’s likely that we’ll see further follow-through in the black line.
Gold vs Stocks Gap
Even miners are starting to slowly play catch-up (however the gold miners vs S&P500 $S&P 500(.SPX)$ ratio is still lagging far behind vs the gold/stocks ratio).
Gold Miners vs the Market
Gold miners’ relative performance has turned out very much akin to defensives (healthcare, staples, utilities) over the past couple of weeks.
The relative performance of miners has in recent years reliably moved higher during market downturns and corrections.
Gold miners’ relative performance vs stocks is as much dependent on gold price strength as it is stock market weakness.
Global FX Reserves Diversification
Jan Nieuwenhuijs estimates that “gold’s percentage of global international reserves jumped up 4%, to 21%, in 2024. That’s the biggest surge in more than four decades.“
This is an interesting chart for 2 reasons, first it goes to show how much allocations to gold have gone up, but also the changing composition across FX reserves — including a shrinking of total allocations to US Dollar assets.
I suspect the allocation to USD may only drop further from here as reserve managers the world over look to rotate out of risky USD assets!
Open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on SG, HK, and US stocks, as well as ETFs. Find out more here.
Other helpful links:
💰Join the TB Contra Telegram Group to Get $10 Trading Vouchers Now🎉
Comments