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Key Indicators Investors Need to Track Gold Prices

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Gold price performance

Gold has been on a roller coaster ride in the month of March. It fell to a four-month low of $1,142 per ounce on March 17 amid concerns that the Fed might hike interest rates earlier than expected, even as early as June 2015. Prices rallied ~4% after the Fed’s comments that suggested a slower pace for the rate hike.

In this series, we’ll look at gold price performance in detail.

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Gold indicators

Gold prices are impacted by a host of variables. In this series, we’ll look at factors investors can track to get a sense of the direction of gold prices.

Investors usually view gold as an inflation hedge. As a result, gold prices are influenced by the following related factors:

  • the macroeconomic outlook for the United States and other world economies
  • the performance of alternative assets such as equities, bonds, and the US dollar
  • interest rates
  • inflation

We’ll also see how US data impact the US dollar and gold prices. We’ll look at the influence of international data. Then we’ll discuss factors such as the US labor market, inflation, and inflation expectations. These are the most important considerations the Fed reviews before deciding on the quantum and timing of rate hikes.

Get a holistic view

Most of these indicators are published monthly, while others are published weekly and quarterly. Although strongly correlated, these indicators are subject to divergences and short-term statistical noise. So the best approach to getting a full picture is to look at these indicators as a whole rather than individually.

These indicators should point you in the same direction as gold prices and gold-backed ETFs such as the SPDR Gold Trust (GLD). They’ll also suggest movements in the share prices of companies such as Goldcorp (GG), Royal Gold, Inc. (RGLD), Silver Wheaton Corp. (SLW), and Kinross Gold Corporation (KGC), as well as ETFs such as the VanEck Vectors Gold Miners ETF (GDX). Combined, these companies make up 19.7% of GDX. The iShares U.S. Basic Materials ETF (IYM) is also a good way to invest in US basic materials stocks. RGLD forms 0.69% of its holdings.

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