NEW YORK — Gold is back on the rise after dropping like lead last year. Although it has recovered just a portion of its steep loss from 2013, the shift in momentum has been enough to halt the stampede of investors from gold-related funds.
The price of gold has jumped 14 percent this year, towering over the nearly flat performance of the Standard & Poor’s 500 index. The stocks of gold-mining companies have been even better. The FTSE Gold Mines index of miners around the world has jumped 25 percent.
To be sure, many analysts don’t expect gold’s mini-rebound to last. Barclays Capital, for example, projects gold will average $1,260 an ounce in the last three months of this year. That would be an 8 percent drop from the current price of roughly $1,370 per ounce. Many of the conditions that led to last year’s decline are still in place: Inflation remains low, the Federal Reserve is slowing its bond-buying stimulus program and the economy is making some progress, even if it’s less than hoped.
Investors are nevertheless giving gold-related funds another chance, albeit tentatively. The SPDR Gold Shares exchange-traded fund (GLD), one of the most popular ways to buy gold, now holds 26.1 million ounces for investors. That’s up from 25.7 million ounces at the end of 2013.
Some managers of gold-related funds say shares of miners look to be a better choice than the metal itself. Mining stocks often swing more sharply than the price of gold and miners were hit particularly hard last year. That leaves them more attractive than gold, managers say.
Another benefit is that gold-mining stocks often pay dividends, says Michael Bradshaw, senior portfolio manager at the Wells Fargo Advantage Precious Metals fund (EKWAK). Each of the fund’s five biggest stock investments pays a dividend. The FTSE Gold Mines index had a 1.7 percent dividend yield at the end of February, while gold yields nothing.
Gold’s descent accelerated last spring amid speculation that the Federal Reserve would pare back its $85 billion in monthly bond purchases. A winding down of the stimulus means less demand for gold from investors worried that the Fed’s efforts would lead to higher inflation.
Experts say gold is insurance because its price rises when fear is high.