Gold Has The Best Quarter In Recent Memory

Gold closed the month with a small but significant gain as traders were betting that gold would decline this month and end the quarter in the red as the bears beat the bulls. But as always, the Federal Reserve surprised markets turning a bit dovish this last week. Gold begins April at 1234.20 which is an increase of 16.38% year to date but a decline of 23% over the last three years. Gold prices rose Thursday and are on track for their biggest quarterly gain in three decades, as investors discount the possibility of the Federal Reserve raising rates in coming months.

The precious metal’s appeal to investors received a boost earlier this week, after Fed Chairwoman Janet Yellen reined in expectations for how far the central bank will raise interest rates in 2016, amid widespread uncertainty over global growth. Expectations of continued low interest rates are good for gold, which pays its holders nothing and struggles to compete with yield-bearing investments when borrowing costs rise.

Gold, a popular safe-haven in turbulent times, has also benefited from a broad swath of investors’ concerns, including fears that central banks are powerless to prevent another 2008-style financial crisis and worries about the consequences of a U.K. exit from the European Union.

Investors, defying the timid forecasts, began piling in during January, with gold held in exchange-traded funds growing for the first time in a year this quarter. Investments rose for all but eight days so far this year. Holdings in ETFs rose 21 percent to 1,761.3 metric tons in the period, the biggest gain in any quarter since the three months ended March 2009, according to data compiled by Bloomberg as of Wednesday. At the same time, trading volumes on the largest futures exchange, the Comex in New York, reached 14.1 million contracts, a record for a first quarter.

Gold and gold mining ETFs continued to burnish their appeal on Thursday, the final trading session of the first quarter. Major stock indexes — which have taken investors on a wild ride in Q1 — barely stirred amid mixed economic data.

SPDR Gold Shares popped almost 1% on the stock market today as the dollar fell further against other major world currencies. The safe haven asset’s advance in a risk-averse market has become a familiar theme for investors this year.

Negative and zero interest rate policies in Europe and Japan have helped to fuel gold’s 16% run-up year to date, the World Gold Council said in a research paper released today.

“Looking forward, government bonds are likely to have limited upside, due to their low-to-negative yields and, in our view, would be less effective than gold in mitigating risk, ensuring portfolio diversification and helping investors achieve their long-term investment objectives,” said Juan Carlos Artigas, the council’s director of investment research. “Portfolio analysis suggests that gold allocations in a low rate environment should be more than twice their long-term average.”

The U.S. dollar index traded lower again Thursday and hit a 5.5-month low. The greenback bears are having a good week so far, and have taken back all of last week’s gains. Traders and investors are awaiting today’s U.S. employment report for March from the Labor Department. This report is arguably the most important economic report of the month. The key non-farm payrolls number is expected to show a rise of just over 200,000 in March. Trading in many markets could become volatile in the immediate aftermath of the jobs report.