Investors’ Demand for Gold is Up

Rising Gold Prices Generate Buzz for BANG Stocks

In the wake of coronavirus economic uncertainty, investors are not only paying attention to FANG stocks—Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL). They also have their eyes on BANG stocks—Barrick (GOLD), Agnico Eagle (AEM), Newmont (NEM), and Goldcorp (GG). BANG stocks have seen gains nearly three times larger than those of FANG stocks since early May 2018.

More recently, gold was up on Tuesday, and has been holding steady at around $1,700 per ounce. While the dollar, which is typically considered reliable during uncertain times, fell 0.4% after reaching its highest level in two weeks. This has some analysts eying gold, which has increased 12% since the beginning of the year, as a hedge against inflation and currency debasement.

Hedge Funds Turn to Gold Investments

Some hedge fund investors are also looking for safety in uncertain times through gold, not the dollar. Elliott Management, Caixin Associates, and Dymon Asia Capital, have benefited from gold investments this year. Paul Singer, who runs Elliot Management, said gold is one of the most “undervalued assets available” with fair value being “multiples of its current price.”

Gold miners are also seeing gains during the pandemic. Last week, Newmont (NEM), the largest gold miner in the world, reported a successful quarter with $822 million in earnings. The company’s stock has leapt by 44% since the beginning of the year. Then, yesterday, SSR Mining (SSRM) announced that it is buying rival gold miner Alacer Gold (ALIAF). It is the second major gold merger this week following Shandong Gold Mining’s deal for TMAC Resources.

The Big Picture

When gold and equities move together, it usually means that the market is being driven by liquidity and changing real yields. This is what is happening currently and what happened in the aftermath of the 2008 financial crisis. Demand for gold goes up when people are worried about the value of currency being unstable.

Across the world, governments are pumping money into their economies with stimulus packages. Approximately $15 trillion has been distributed by governments over the course of the pandemic. While these measures have saved jobs and propped up businesses reeling from coronavirus fallout, the relief packages have made some wary of currency debasement and inflation. For this reason, many investors are looking more closely at gold.

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