Gold is on pace for its best year since 2010. Already the yellow metal has seen a run-up of 21.6% year-to-date, as tracked by our partners at the WSJ Market Data Group, closing at $1289.20. That may continue as global equity and currency investors head for the hills.
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“Everywhere the investor looks these days there is political and macro-economic uncertainty,” said George Gero, managing director, RBC Wealth Management during an interview with FOXBusiness.com. Gero notes, there was no shortage of confusing signals this week. The Bank of Japan decided against more stimulus, while the Federal Reserve sent a fresh round of mixed signals to the market after leaving rates unchanged. Add in the fact that the U.S. economy grew just 0.5% in the 1Q. Now investors are wondering whether or not Fed Chair Janet Yellen will be able to raise interest rates at all this year.
As central banks bungle monetary policy, currencies are getting whipsawed. The dollar is down 10% vs. the Japanese yen, which is also helping goose gold. The dollar saw its biggest slide since 2010 on Thursday.
|GLD||SPDR GOLD SHARES TRUST - EUR ACC||123.68||-0.50||-0.40%|
The safe-haven metal, which is portable and can be converted into any currency, is also benefiting from political uncertainty around the globe. The U.K. is threatening to leave the European Union in a move that has been dubbed “Brexit.” That vote is set to take place on June 23. Meanwhile Europe as a whole is struggling with a massive migrant crisis. And in the U.S., the race for the White House has also left investors feeling confused, notes Gero.
That confusion is being complicated by a perfect storm of fiscal and economic issues. Speaking on FOX Business Network’s Mornings With Maria, Mohamed El-Erian, chief economic adviser at Allianz, said, “Whether you look at Japan or the United States, there are four common areas. One is we need to invest in real growth engine; that’s tax reform, infrastructure, labor market training. Secondly, we need to better match the willingness and ability to spend, that speaks to fiscal policy. Third, we need to deal with excessive indebtedness in Greece, student loans here. And finally, we need better policy coordination. Maria, it is not an engineering problem, this is an implementation problem.”
The S&P 500 (NYSE:SPY) and the Dow Jones Industrial Average (NYSE:DIA) are little changed this year, while the Nasdaq Composite (NASDAQ:QQQ) is down 4%.