| Exploring how Gold Investments Can Depend on Inflation | |
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Will Asian Markets Decide Gold's Price in 2016? (Continued from Prior Part) Inflation and gold
Inflation and gold have a long-sought relation with each other. Investors perceive gold as a hedge against rising inflation. The relationship may not necessarily hold in the short run, but over a little longer run, say 10–15 years, investors may buy gold to protect themselves from rising commodity prices. One of the major concerns around the hike in the interest rates has been the lower inflation.
Even with such lower inflation concerns, the Federal Reserve raised interest rates for the first time in almost a decade on clues of labor market improvement. Higher interest rates, coupled with sticky downward inflation, erode the investor appeal for gold. Let’s not forget that gold is a non-interest-bearing asset, unlike Treasuries.
The US ten-year break-even spread
We use the yield spread or the break-even spread to depict inflation in the US economy. This measures the difference between the ten-year US government bond yield and TIPS (Treasury Inflation-Protected Securities).
The principal invested in TIPS is adjusted in line with the CPI (consumer price index). The yield spread, therefore, seems to be a good proxy for the US inflation measure.
As the graph above shows, a close link between gold and inflation developed right after the 2008 crisis. As inflation continues staying low, the hope for a significant bounce back in gold prices remains dependent on the inflation move. The direction in gold prices will also determine the direction of ETFs like the iShares Gold Trust (IAU) and the Market Vectors Junior Gold ETF (GDXJ). The mining companies are majorly price takers and look out for gold price fluctuation. Stocks like Agnico Eagle Mines (AEM), New Gold (NGD), and Aurico Gold (AUQ) may depend on gold price fluctuations. These three make up 8% of the Market Vectors Gold Miners ETF (GDX).
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New Gold Inc.
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PRODUCER |
CODE : NGD |
ISIN : CA6445351068 |
CUSIP : 644535106 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
New Gold is a gold producing company based in Canada. New Gold produces gold, copper, lead, silver and zinc in Australia and in Mexico, develops copper, gold and silver in Brazil, in Canada and in Chile, and holds various exploration projects in Canada. Its main assets in production are PEAK MINES in Australia and CERRO SAN PEDRO, MESQUITE and CERRO SAN PEDRO in Mexico, its main assets in development are AMAPARI in Brazil, NEW AFTON in Canada and EL MORRO in Chile and its main exploration properties are AJAX - PYTHON, BUCK CLAIMS, 3TS, SIZZLER, CC PROPERTY, VO PROPERTY, TAK PROPERTY, MOUSE MOUNTAIN, G-SOUTH, CHUBBY BEAR, LIBERTY BELL, BOULEVARD, BOUVETTE, WIT YUKON, RAM, SLATE FALLS, PROSPECTOR MOUNTAIN, MAYO, DAVIDSON, BLACKWATER, BOULDER CREEK, CAPOOSE, NATIONAL, CORRAL CANYON and RUDE CREEK in Canada and RIO FIGUEROA in Chile. New Gold is listed in Canada, in Germany and in United States of America. Its market capitalisation is US$ 1.3 billions as of today (€ 1.2 billions). Its stock quote reached its highest recent level on January 07, 2011 at US$ 9.99, and its lowest recent point on March 20, 2020 at US$ 0.39. New Gold has 575 460 032 shares outstanding. |