Gold and silver rallied (5.3% and 3.4% respectively) in January, as stocks fell sharply.
Turmoil and sharp falls in Chinese and global stock markets, plunging oil prices, rising stress in credit markets and further signs of weak US and global growth led to a renewed bout of risk aversion in January.
Finviz.com
This once again led to increased demand for traditional safe-haven assets – gold and silver.
Gold’s best monthly gain in dollar terms in a year, contrasted sharply with the sharp drop in US equities. For the month, the S&P 500 shed 5.1% – the sharpest fall in the S&P 500 index since the Greek debt crisis broke in May 2010. It was the S&Ps worst monthly start to a year since 2009 and other international stock indices had there worst monthly start to the year since 2008.
The DJIA lost 5.5%, for the biggest monthly losses since August and the biggest January declines since 2009. The Nasdaq plunged 7.9%, its worst month since May 2010.
U.S. stocks as measured by the Russell 3000 index fell 5.74% in the month. Tech darlings Apple and Amazon were the largest contributors to the decline. Apple fell 7.52% in the month, while Amazon fell 13.15%.
Europe’s benchmark Stoxx 600 saw January losses of 6.4pc and the DAX was 8.9% lower with vulnerable Deutsche Bank collapsing over 25%.
Emerging markets equities as measured by the MSCI Emerging Markets index fell 9.06%. The Chinese stock market, the Shanghai Composite Index, collapsed 23 percent, the biggest monthly drop since October 2008 and the worst performance among 93 equity indices tracked by Bloomberg internationally.
Brokers and Wall Street strategists had predicted another 10 percent gain for equities in 2016. Wall Street and others bullish predictions are now being revised downwards as measures of investor anxiety reach levels not seen in a few years.
The risk-off trade saw flows into gold and silver and also into U.S. bonds. While the dollar fell versus gold, other currencies fared worse than the dollar. The New Zealand dollar fell more than 5% in the month vs. the U.S. dollar and sterling fell 3.66%.
Ultra loose monetary policies globally, the BOJ negative interest rates and increasing speculation that the Federal Reserve will have to delay further interest-rate increases is burnishing gold’s appeal and bodes well for gold in 2016.
Precious Metal Prices
1 Feb: USD 1,122.00, EUR 1,032.86 and GBP 785.60 per ounce
29 Jan: USD 1,112.90, EUR 1,019.89 and GBP 776.84 per ounce
28 Jan: USD 1,119.00, EUR 1,026.14 and GBP 781.59 per ounce
27 Jan: USD 1,116.50, EUR 1,027.14 and GBP 781.04 per ounce
26 Jan: USD 1,114.70, EUR 1,028.42 and GBP 785.80 per ounce
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Mark O’Byrne
Research Director
