As the saying goes: there is always a bull market someplace. Perhaps one of the advantages of trading futures is that there are many choices for the individual trader. These include E-mini S&P futures, crude oil and other energy futures, a plethora of grain futures, and of course the precious metals.
Zeroing in on the year's biggest winners, through mid-August, silver and gold futures have stolen center stage with big double-digit gains in the commodity arena. Through August 19, silver futures have posted a whopping 39% gain, while gold futures are up 26%, according to barchart.com.
What's behind the big gains in precious metals? Here's a look at few factors driving gold and silver now.
- Concerns over negative interest rate policies.
In the wake of the 2008 global financial crisis, a number of major advanced economies continue to struggle to generate historically normal economic growth levels. With fiscal policy on hold in many advanced nations central banks have implemented negative interest rate policies. These include:
- The European Central Bank
- The Bank of Japan
- The Danish Central Bank
- The Swedish Central Bank
- The Swiss Central Bank
These global central banks have turned to this unprecedented attempt at economic stimulus amid a dearth of other policy choices. In turn this has spurred increased interest in the precious metals markets in 2016 as global investors begin to lose confidence in the effectiveness of monetary policies, analysts at the World Gold Council say.
Gold is viewed as a safe-haven investment amid times of global economic, monetary and political uncertainty, and also as an alternative currency by some.
- Delays in the current Federal Reserve tightening cycle.
Gold has benefited throughout 2016 from delays in the current Fed interest-rate hiking cycle. After the Fed pulled the trigger on a modest .25 basis point rate increase in December 2015, many analysts forecast as many as three to four interest rate hikes in 2016.
How many has the Fed delivered to date? None.
Early year stock market volatility, concerns about Chinese economic growth, slower-than-expected U.S. inflation data and more recently the unexpected Brexit vote by the U.K. have all contributed to steady Federal Reserve thus far in 2016. Gold has strengthened amid delays by the Fed as the market had previously sold off in anticipation of a rate hike cycle.
- Global demand for the metal remains high.
Global gold demand climbed to 2,335 tonnes in the first half of 2016 with investment reaching record first half levels, 16% higher than the previous record in first half 2009, according to the World Gold Council’s latest Gold Demand Trends report.
“The global picture for gold is dominated by considerable and continued investment demand driven by the West as investors rebalance their investments in response to the ever-expanding pool of negative yielding government bonds and heightened political and economic uncertainty," said Alistair Hewitt, Head of Market Intelligence at the World Gold Council.
As the old saying goes: the trend is your friend. Through the first eight months of 2016, gold and silver futures delivered solid uptrends in price. If you've never traded gold or silver futures before, why not take a look?