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Are Gold Speculators Betting on 'One and Done'?

February 8, 2016 1:45 PM EST

Amid carnage in most markets, traders have found a safe haven again in Gold. Gold mining companies and the underlying commodity have been sharply outperforming the broader market as the recession drumbeat grows louder and worries about global banks and credit markets reemerge.

As an example, SPDR Gold Shares (NYSE: GLD), the flagship ETF that tracks gold bullion, is up nearly 13% year-to-date.

The move in gold is somewhat counter-intuitive - in a rising rate environment the dollar should strengthen thereby weakening gold. However, this has not been the case, which suggests speculators are betting on 'one and done' from Fed Chairman Janet Yellen.

Gold's fortunes are directly correlated to the dovish/hawkish views of the Fed. In December 2015, the Fed raised rates for the first time in 9 years. The 25 basis point hike moved the fed funds rate from 0-0.25% to 0.25-0.5%. The fed had held the rate near zero for 7 years amid the financial crisis. The fed has indicated that they plan to continue the path to normalizing interest rates, although worries in China, the junk bond market, the oil price collapse and signs of slowing global economic growth may stall these plans. In its January 27th statement, the Fed maintained the 0.25-0.5% fed funds rate. The next FOMC meeting statement is expected March 16.

Below are the YTD performance number of a number of top-tier gold mining stocks and ETFs:

  • Market Vectors Gold Miners ETF (NYSE: GDX) +30.4%
  • Barrick Gold (NYSE: ABX) +66%
  • Goldcorp (NYSE: GG) +31%
  • Newmont Mining (NYSE: NEM) +41%
  • Kinross Gold (NYSE: KGC) +40%
  • Agnico Eagle Mines (NYSE: AEM) 33.7%
  • IAMGOLD (NYSE: IAG) +44%
  • Yamana Gold Inc. (NYSE: AUY) +45%


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