The equities market and stock exchange traded funds just wrapped up an impressive recovery to what was one of the worst starts to a new year.
While the stock markets gyrated and clawed back from the earlier plunge, there were some areas that shined through the muck. Leading the markets higher over the first quarter, the PureFunds ISE Junior Silver ETF (NYSEArca: SILJ) gained 71.7%, iShares MSCI Global Gold Miners ETF (NYSEArca: RING) increased 56.2% and Sprott Junior Gold Miners ETF (NYSEArca: SGDJ) rose 49.4%.
SILJ tracks a group of junior or small-cap silver miners. RING follows a cap-weighted index of global gold miners, so it leans toward larger gold producers. SGDJ, on the other hand, focuses on junior or small-cap gold miners from the U.S. and Canada.
Precious metals miners have been the standout performers of the first quarter as gold bullion strengthened on safe-haven demand and a more dovish Federal Reserve outlook.
During the start of the year when the equities markets registered slipped into a correction, investors piled into gold hard assets as a safe store of wealth. Once equities started rebounding, traders maintained their gold positions on the depreciating U.S. dollar and smaller interest rate hike outlook from the Fed, betting that precious metals will help hedge against a a more volatile outlook.
Meanwhile, gold miners, which have been among the worst performing assets over recent years, staged a rally on the strengthened gold market, even outperforming bullion prices, which jumped 17% year-to-date.
Looking ahead, gold and the precious metals miners could have more room to run as an ongoing low-rate environment, both in the U.S. and overseas where some central banks are pushing negative-interest rates, could continue to drive investment demand for gold as a safer store of wealth. The low-rate environment helps diminish the opportunity cost of of holding gold assets. Specifically, as low-rates help prop up fixed-income assets, bonds yields are falling and some sovereign debt appears overbought. Alternatively, gold assets look like an attractive alternative to hedge against volatility down the road, especially after underperforming in recent years.