Gold Is Glittering Among Investors Amid Volatility
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whelan at The Wall Street Journal in New York. For the first time in 2018, gold and gold-related stocks are glittering. We'll discuss in a moment how long they're expected to hold their shine. First, these money and market stories you should know. The Economic Policy Institute says the average salary for the top 1% of income earners hit $719,000 per year in 2017. That's up 3.7% on the year and higher than the previous high of $716,000 per year just before the Great Recession. Meanwhile, the average wage for the top one-tenth of 1% reached $2.7 million last year. That's up 8% over 2017, and it's the second highest level ever, just 4% below their level in 2007. The current tight labor market has employers in a position to be reluctant to lay off workers, and that showed up in the number of Americans filing applications for new unemployment benefits, which fell last week to 210,000.
That's the lowest in about 45 years. The early figures show the first time unemployment claims in Florida fell last week, but the number of people filing for unemployment benefits could grow in the coming weeks as those who lost their jobs due to Hurricane Michael are able to file for benefits.
Why are gold and gold-related stocks gaining support amid October volatility?
And a study published this week in the journal Human Nature found that people are more likely to give to charity when they feel as if they're being watched. In a 28-week experiment in a children's museum involving more than 31,000 adults, people were more likely to contribute to a donations box when a sign labeled Donations Would Be Appreciated included pictures of people's eyes, as opposed to when only the text appeared. The average increase per museum visitor was one cent when eyes appeared on the sign, That added up to a $12 bump per week.
October's market volatility hasn't caused many investors' portfolios to glitter, but gold mining stocks have taken on a shine.
How did recent market volatility and a strong U.S. dollar affect gold’s safe-haven role?
And Wall Street Journal reporter Reva Gold joins us to discuss. So Reva, seeing strength in gold and gold-related stocks is not a surprise during times of market volatility, right?
Yeah, historically you've seen gold take on this property as a store of value. And when people are really concerned about stocks, about any kind of risky assets, it tends to rise alongside things like utilities, the Swiss franc and the yen, and some kinds of government bonds as investors really seek stable things that are not necessarily connected or tied to economic growth.
Why do gold mining stocks act as a leveraged bet on gold prices?
But in this particular market volatility period, it was the strength of the U.S. dollar that was sort of holding gold and gold-related stocks back for a while.
Definitely.
How have rising U.S. interest rates and a stronger dollar pressured gold this year?
During earlier sell-offs this year, people really started to question the role of gold as a haven. And a lot of that came because of a stronger dollar, which not only makes gold more expensive to foreign buyers, but it's also competing with gold as a safe haven asset. And that's coming as a result of expectations for higher U.S. interest rates that are an additional problem for gold prices because when rates go up, gold struggles to compete with things that offer a yield.
Could a U.S. economic slowdown further boost gold and gold-mining stocks?
And for investors looking for cover during choppy times in the equity markets, gold mining stocks allow them to place a bet on gold itself without actually investing directly in gold. Is that right?
That's right. It's effectively a leveraged way to bet on gold because a lot of these companies have fixed production costs.
Where can listeners follow ongoing coverage and analysis of the gold market?
Profitability scales up really rapidly when gold prices move either up or down. So if gold moves a little bit, you can expect shares of these kinds of stocks to move quite a lot.
And the rising interest rates in the U.S. also held back gold stocks for a while. In fact, for the weeks and months leading up to this current stretch of volatility, it's been a rather depressed time for the gold and gold related properties.
Gold has definitely had a terrible year. And a lot of these mining shares, even with the rally that you've had during the sell off, are still sitting on double digit percentage decline.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–1:24
2
Why are gold and gold-related stocks gaining support amid October volatility?
1:24–2:12
3
How did recent market volatility and a strong U.S. dollar affect gold’s safe-haven role?
2:12–2:47
4
Why do gold mining stocks act as a leveraged bet on gold prices?
2:47–2:58
5
How have rising U.S. interest rates and a stronger dollar pressured gold this year?
2:58–3:27
6
Could a U.S. economic slowdown further boost gold and gold-mining stocks?
3:27–3:48
7
Where can listeners follow ongoing coverage and analysis of the gold market?
3:48–5:45
Speakers
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