Trade war added $12 billion to gold stocks in just 3 days

  • Gold prices climbed above $1,300 an ounce on 31 May, when Donald Trump said he plans to impose a 5% tariff on all Mexican goods
  • S&P/TSX Global Gold Sector Index has added C$16.7 billion in market value over the past three days

Toronto: Gold’s safe-haven trade may have finally gotten its mojo back.

While trade war jitters have caused a massive meltdown in equity markets, gold has reaped the benefit. Gold prices climbed above $1,300 an ounce on 31 May, when President Donald Trump said he plans to impose a 5% tariff on all Mexican goods. Gold prices have continued to climb and the S&P/TSX Global Gold Sector Index has now added C$16.7 billion in market value ($12.5 billion) over the past three days, according to data compiled by Bloomberg.

Gold stocks have been a safer bet than materials this year for investors in Canada. The Gold Index has gained 6.3% so far in 2019 while materials are up only 5%, the worst performance among the eleven sectors in Canada’s benchmark index.

Market strategists have recommended investors stay defensive amid trade fears. Haywood strategist Keith Edwards said one way to do this is to accumulate gold and gold stocks. Some of the top performing gold miners this year have been mid-tier companies including Alacer Gold Corp., which is up 63%, Semafo Inc., which is up 58%, and Alamos Gold, which is up 42%.

Macro challenges may need to persist for gold to truly outshine other asset classes. “We could be in the early innings of an outperformance cycle," said Canaccord’s portfolio strategist Martin Roberge. He recommends investors overweight gold stocks for now but says it “could lose its luster" if prices break above $1,360 a share.

Close