The following is an excerpt from Chris Dieterich | April 11, 2016 | Barrons.com |
Gold prices are heating up again. Gold futures added 1.1% to $1,258 a troy ounce on Monday, assisted by a weaker greenback.
Shares of the SPDR Gold Shares (GLD) added 1.4% to close at $120.03, the highest in just over three weeks. Monday’s advance leaves the $33 billion ETF less than 2% below its closing high for 2016 ($121.50, on March 10).
Gold’s inexorable rise to its best quarter in 30 years has been well documented. Investors rushed to gold funds early this year as stocks careened lower and concerns about a hard landing in China spooked investors even more. Gold investors remain revved up, it seems, because of near-zero and in some cases negative interest rates overseas. Why pay to stash money in banks, after all, when you can own gold?
Add the recently weak dollar to early-year recession jitters and concerns about negative interest rates. A dovish Federal Reserve, one that doesn’t sound very much like it wants to raise interest rates soon, is hitting the U.S. dollar, which on Monday declined versus a basket of major currencies for the seventh day in a row. Remember that a weaker dollar tends to be good for gold because it makes the commodity/store of wealth/currency more attractive to overseas buyers.
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