Gold Rally Pushes GLD Ahead of SPY in 2024

Gold hit an all-time high of more than $2,500 an ounce on Friday morning, sending SPDR Gold Shares ETF (GLD) rose nearly 1.5 percent as the dollar softened amid growing expectations that the U.S. central bank will cut interest rates in September.

The precious metal recently rose nearly 2.5% after trading roughly flat over the past month. The dollar fell about 0.4 percent on Friday, according to Wall Street Journal data, and is down about 1.8 percent over the past month.

“In addition to the Chinese being purported to be massive buyers, the recent rally is due to softer or weaker economic data supporting Fed rate cuts,” said Paul Schatz, president of Woodbridge, Conn.-based Heritage Capital.

“Lower rates are usually, but not always, a tailwind for gold, as lighter money often leads to higher prices,” he added.

GLD is up more than 17% this year as growing macroeconomic uncertainty — including weak jobs data, possible missteps by the U.S. central bank and a potential U.S. recession — has increased volatility. But the Fed is now expected to cut rates at its next Federal Open Market Committee meeting, which starts on September 17, perhaps by as much as 50 basis points.

Investors will be watching for comments from Fed Chairman Jerome Powell next week at the annual Jackson Hole Symposium for favorable monetary signals.

GLD’s 26% growth over the past year

GLD is up 26% over the past 12 months, compared to five- and 10-year annualized returns of 9.7% and 6%, respectively.

For comparison, SPDR S&P 500 Trust (SPY) it’s up 12.8% this year, 21% over the past 12 months and generated five- and 10-year annualized returns of 14.6% and 12.7%, respectively.

The price of gold often rises during times of economic uncertainty, as investors view it as a safe-haven asset and sometimes use it as a hedge against inflation.

“With gold on the rise, many investors are questioning whether they should hold it in their portfolios,” said Chuck Etzweiler, senior vice president of research at Nepsis in Savage, Minn.

“We view gold as a currency hedge and not as an investment,” he added. “If a country’s currency is in a period of devaluation, it can provide some protection. However, over the long term, the results strongly favor business ownership of publicly traded companies as the most ideal path not only for wealth creation, but also for wealth preservation.”

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