Battling The Buck
By Ima Casanova, Deputy Portfolio Manager
The real contender for gold this year has been the U.S. dollar. Investors are tasked with deciding whether to hold gold to protect their portfolios from high inflation and geopolitical tensions, or to reduce their holdings as global interest rates rise. In an environment of rising rates and the outlook for inflation to come down as a result of the monetary tightening programs by U.S Federal Reserve (the Fed) and other central banks, investors have chosen the safety of the U.S. dollar. This has propelled it to 20-year highs, and this has been the biggest headwind for gold this year.
The recent gold price action, following the U.S. consumer price index (CPI) report for October, is a perfect example of how expectations of a Fed pivot/slow down getting priced in can benefit gold. The gold price broke out of its recent downward trend trading well above $1,700 per ounce and it now looks like it may be back on the longer-term bull trend that has been in place since 2016.
MVIS® Global Junior Gold Miners Index
Source: MarketVector IndexesTM. All values are rebased to 1,000. Data as of December 27, 2022.
About the Author:
Ima Casanova joined VanEck in 2011. Prior to VanEck, Ima was Managing Director and Senior Equity Research Analyst at McNicoll Lewis & Vlak and established the firm's metals and mining research department. Previously, she was Equity Research Analyst at Barnard Jacobs Mellet USA and BMO Capital Markets and held positions as Production Technologist, Offshore Wellsite Supervisor and Petroleum Engineer for Shell Exploration and Production. Ima has both an MS and a BS (magna cum laude) in Mechanical Engineering from Case Western Reserve University.
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