Gold is performing great!
So great, that even Bloomberg becomes positive. This is what the mainstream media outlet wrote on Friday: Gold headed for its biggest monthly gain in four years as falling equities bolstered demand for a haven asset during February.
Indeed, the price of gold reflects increased demand, as, for the first time since the highs in 2011, the price of gold has entered a bull market. Gold is now up over 21% from the early December lows, it is trading at a one-year high and, most importantly, it is outperforming all other asset classes.
Zerohedge published this chart which is interesting for its annotations reflecting the % rise of each rally since 2011.
One of the beneficiaries of the gold sector is the largest tradable gold ETF: GLD. As seen in the chart below, gold ETF inflows surged to the highest since 2009. The last time inflows were high, the S&P 500 had fallen more than 18 percent for the year and the Federal Reserve was only three months into its first QE program, according to Bloomberg.
Indeed, the last time GLD ETF demand was so high it was right before the first QE program was launched in 2009. It was a spot-on leading indicator at that time, but will it be now as well? Chances are high that central banks will come out massively with new stimulus, in the coming weeks and monhts. They are scared, without any doubt, about recent market volatility, which started on August 24th last year. This is also confirmed by Deutsche Bank, raising its outlook on gold, citing slowing global growth and the possibility of a large yuan devaluation. Currency devaluations are just one of the many tools at the disposal of central banks. We expect to see similar huge decisions over the course of 2016. Gold, potentially, is already anticipating that.