by John Browne
Euro Pacific Capital
As 2015 came to a close, most investors believed that 2016 would be a year dominated by a series of Fed rate hikes. That conviction solidified in mid-October when comments from multiple Fed officials convinced many that prior hints that the Fed would stay at zero percent rates had been false alarms. The Fed delivered on its promise in mid-December by actually raising rates by 25 basis points. Based on this, gold declined by 10% from October 14 to the end of the year, nearly matching its six year low. Many on Wall Street thought the declines would continue into 2016. They were decidedly wrong.
In the first 14 weeks of the New Year, gold rose 16%. The first quarter qualified as its best beginning year performance in 30 years (CNBC, E. Rosenbaum, 4/14/16). The reversal was prompted by stumbling stock markets and a series of sharply dovish turns from central banks around the world.