Gold Performance Versus Other Investments in 1H17

In the first half of 2017, gold prices rose 8.0%. That’s in addition to the 8.5% annual gain in 2016. The trend for gold prices in the first half of 2017 was quite volatile. At one point in April 2017, prices rose 12.0% compared to the start of 2017. The S&P 500 (SPY) (SPX-INDEX) marginally outperformed gold with a first half-year rise of 8.2%. Gold’s gain is in line with the 6.4% fall in the US dollar in the first half of 2017. You should note that gold and the US dollar usually have an inverse relationship.

The first half of 2017, however, was not as strong for silver, which rose only 3.8%. Although silver usually acts as a leveraged play on gold prices, the underperformance in times of gold strength could be attributed to silver’s industrial demand impacting its prices. Platinum and palladium, on the other hand, rose 2.3% and 22.5%, respectively.

The major factors that have impacted gold prices in the first half of 2017 include the weaker US dollar, geopolitical uncertainties, higher interest rates, and expectations regarding President Trump’s ability to push through his campaign agenda. While the Fed’s increase in interest rates acted to stop gold’s run, the weaker US dollar and other geopolitical concerns helped gold shine. In addition, the physical gold demand remained strong, especially in China and India. After witnessing a lackluster physical gold demand toward the end of 2016 due to economy-specific reasons, the demand in these countries picked up in 2017.

Of the major precious metal miners (SIL) (GDX), Iamgold (IAG), Kinross Gold (KGC), Royal Gold (RGLD), Franco-Nevada (FNV), and Gold Fields (GFI) rose the most at 34.0%, 31.0%, 23.4%, 20.7%, and 15.6%, respectively.