Gold hits record high, but equities lag

Investors rushed into gold on Tuesday, sending the price to a new record high amid continuing concerns about political unrest in the Middle East, the impact of rising crude oil prices and a sagging stock market.

Gold futures (GC-FT) closed at $1,431.20 (U.S.) an ounce in New York, up $21.30. Gold’s previous high was in early December, when it closed at $1,423.75 an ounce.

Though gold has few industrial uses, it is viewed by some investors as an ideal haven during times of rising inflation or unrest. In recent years, it has also served as a play against the U.S. dollar, which has been falling in value against a basket of currencies as the U.S. Federal Reserve resorts to unusual methods to revive the economy.

Over the past five years, gold has surged more than 150 per cent in U.S. dollar terms, compared with a gain of 15 per cent for the S&P 500, after factoring in dividends.

On Tuesday, the jump in the price of gold coincided with more violence in Libya, along with anti-government demonstrations in Iran that followed the arrest of two of the country’s opposition leaders.

The turmoil in the oil-rich region sent the price of crude oil up to $99.63 a barrel in New York, up $2.66. That marks oil’s highest close since 2008, and reignites concerns about its impact on inflation and global economic growth.

Gold’s rebound to record-high territory means it has fully closed the gap that opened when it fell 7.7 per cent between early December and the end of January, when strong U.S. economic data along with assurances from the U.S. Federal Reserve that inflation was not a threat suggested that safe havens were not needed.

Gold stocks, however, have yet to benefit from bullion’s jump. The NYSE Arca Gold Bugs – an index of 16 gold producers, including Barrick Gold Corp., (ABX-T) Goldcorp Inc. (G-T) and Kinross Gold Corp. (K-T) – peaked on Dec. 6 along with the price of gold, but has yet to climb back to that level.

The index is 2.7 per cent below its previous high point, suggesting that equity investors are keeping a step behind the price of gold.

Since that December high, gold stocks certainly haven’t been moving as a group – largely because earnings season landed with mixed results in the middle of February.

Iamgold Corp. (IAG-N) is the biggest winner, with gains of nearly 29 per cent, meaning that it has walloped gold’s price appreciation. Coeur d’Alene Mines Corp. (CDM-T) (mostly a silver producer) is also a winner, with gains of about 23 per cent.

Meanwhile, Barrick Gold is down 1.6 per cent, Newmont Mining Corp.(NEM-N) is down about 11 per cent and Kinross Gold is down 17 per cent – even as all three stocks enjoyed gains on Tuesday.

(Source: http://www.theglobeandmail.com/globe-investor/markets/markets-blog/gold-hits-record-high-but-equities-lag/article1925501/?utm_medium=Feeds:%20RSS/Atom&utm_source=Report%20On%20Business&utm_content=1925501)