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Gold Finds Synergies as Macro Views Diverge

By Joe Foster, VanEck Portfolio Manager and Strategist

After six months of gains in which the gold price rose by $175 per ounce to $1,345, March saw some profit-taking. Gold fell to its monthly low of $1,280 on March 7 amid near-term U.S. dollar strength. However, the gold market quickly reversed course when the U.S. Department of Labor reported non-farm payrolls increased by just 20,000, compared to median expectations of 180,000. On the same day, the European Central Bank (ECB) announced a policy reversal, offering cheap loans to banks and keeping interest rates at record lows for longer than planned. This caused recessionary fears to re-emerge as long-term treasury yields fell to 15-month lows, the yield curve inverted slightly for the first time since 2007, and gold trended to its monthly high of $1,324 on March 25. As the month ended, there was broad weakness among precious metals due to a sharp fall in palladium prices. There were also reports of heavy official selling from Turkey to prop up the lira ahead of local elections on March 31. Gold ended the month at $1,292.30 for a loss of $21.01 per ounce (down 1.6%).

After about two years without reporting any purchases, the People’s Bank of China (PBOC) reported its third consecutive month of gold buying, with a February inflow of 9.95 tonnes. This suggests the Chinese are again consistent buyers, which bodes well for central bank demand in 2019.

Gold stocks more or less matched gold’s performance in March with a 0.74% gain in the NYSE Arca Gold Miners Index (GDM) 1 and a 2.3% loss for the MVIS Global Junior Gold Miners Index.2

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