Gold’s performance is approaching its best in 44 years – TDS

Gold’s year-to-date return is currently the third-best performance since 1980 and, in reality, is just one rounding error away from its best performance in 44 years, TDS analysts note.

A rounding error away from the best performance of all time

“While we can argue that fund FOMO is hard to account for, there is evidence of notable OTC interest in physical markets hitting boxes with BOE Gold while trading tight. Since the Fed began its easing cycle with a 50bp cut, commodity prices, inflation swaps and long-term US yields have risen simultaneously and even outpaced the rise in risk assets by some measures.”

“The cross-section of commodity prices continues to signal a significant improvement in demand expectations, and while survey-based measures of consumer confidence are deteriorating, consumer spending patterns have remained strong. While ultimately this could easily be seen as an overreaction to the Fed’s 50bp start to its tapering cycle, a persistence in this trend could signal more worrying signs that it may not be so easy as the Fed hopes to cut rates without reflation.

“On the contrary, if these trends simply reflect an overreaction at the start of the easing cycle, then it’s worth pointing out that in the years following such an outstanding performance in gold, pullbacks over the next year have averaged -27%.