Agio Gold Sector Fund Market Update: May 2024

Gold Equities – Breakout!

On May 9th, the GDXJ, a key Gold Equity ETF that we track, closed at a significant level, matching its previous high from over a year ago. While the price itself hasn’t changed much, this matching high is important because it shows that investors are consistently interested in gold. This steady interest suggests that gold stocks are likely to continue gaining value.


Gold’s Performance

Gold has been doing exceptionally well compared to other commodities. In early March, the ratio between the price of gold and a basket of other commodities indicated that gold was starting to outperform them. This is good news for two reasons: first, it means that adjusting for inflation, gold’s price is a key factor in making money from the sector. Second, it shows that investing in gold stocks is a crucial part of a successful precious metals investment strategy.


Global Stock Markets

Global stock markets have also reached new highs, even though the economic growth in major countries like the UK, Germany, Japan, and China has been slow. This raises a big question: Can the strong performance in the U.S. help boost the global economy, or will weaknesses in the global market hinder the U.S. recovery? These turning points are not unusual and can be anticipated by looking at the global currency market, particularly the Eurodollar, which is the U.S. dollar traded outside of the U.S.


Currencies and Credit

The U.S. dollar index has been stable, which is a good sign in a world where global credit is shrinking. A strong dollar can be challenging for countries that owe money in dollars, a problem that dates back to ancient times. The issue isn’t so much about governments creating too many dollars, but rather the lack of dollars being circulated by global banks.


The U.S. Treasury Yield Curve

The U.S. Treasury yield curve, which shows the relationship between interest rates and the time to maturity for U.S. Treasury securities, is currently inverted. This means that short-term interest rates are higher than long-term rates, which is unusual. When this curve starts to normalize, we can expect significant market changes. Until then, it’s wise to protect your investments against the current market trends and prepare for a potential reversal. One way to do this is by investing in the gold sector, which can benefit from the tightening of credit.



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