Gold is off to a fine start this year as illustrated by year-to-date gains of over 7.5% for gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL). Some market observers believe the yellow metal can keep climbing.
Gold ETFs have also been grappling with the surprising results of the U.S. presidential election. Investors widely expected gold to rally if Republican Donald Trump won the presidential election in November, which he did, but that thesis proved incorrect. Democratic challenger Hillary Clinton may have actually been the preferred victor for gold ETFs because historical data suggest gold performs better when Democrats are in the White House.
Gold saw renewed safe-haven demand, especially as more traders grow cautious on speculation that Trump’s policies may not move forward in a timely fashion.
Precious metals also strengthened after data out earlier this month revealed U.S. wage growth slowed, which diminished the chance of a Federal Reserve interest rate hike this year.
“The primary drivers of the “Trumped Up,” or bullish, portion of our thesis are the proliferation of uncertainty, persistent external volatility, and numerous policy unknowns. We expect these drivers to skew upward in size but downward in cadence as the market gets a better handle on how to grapple with the new environment,” according to an RBC note posted by Dimitra DeFotis of Barron’s.