As much as the last quarter of 2009 showered gold investors with no shortage of excitement, the first quarter of 2010 has brought little more than tired yawns. And that is despite the gold price hitting a nominal all-time high in both Euro and British Pound. Indeed, gold’s resilience has been remarkable since the beginning of the year.

In light of the well-publicized Euro-Mediterranean troubles, it could have been anything but. During the quarter, the dollar has gained 7.2% against Euro and the broadly measured, trade-weighted dollar has advanced by nearly 4%. And yet, in dollar terms, gold has added its 6th straight quarter of gain (around 1.7%), even though the momentum has definitely ebbed (50-day moving average is now below the level attained at the beginning of the year).

Things have been more exciting for Euro-denominated investors. Having peaked in May’06, March’08, October’08, February’09 and December’09, gold has again offered an all-time high for the troubled denizens of the Eurozone. This time, gold peaked at EUR 840 (intraday) on March 4 and returned 7.8% over the quarter, proving its asymmetric resilience to USD/EUR correlation. As the global capital flows continue to be dominated by two structurally weak currencies – USD and EUR – opportunities abound in gold, not only in terms of long-term capital preservation, but also to occasionally take profits from the combined forces of competitive weakening of the public-debt plagued currencies, and their shifting correlations with gold. Interestingly, the picture in British Pound appears very similar.

But in this world of weak currencies – is there anyone on the other side of the counter? Certainly not the Swiss Franc. Swiss investors have enjoyed a creditable 3.7% gain in gold during the first quarter, partly due to the looming (and recurrently implemented) menace of SNB’s intervention in the currency markets. The Japanese investors, who have not seen an all-time high gold price since December, have also enjoyed a decent quarter, with the return staying positive at 1.6%. This leaves the titans of the currency market – the Australian dollar (negative gold returns of about 1%) and the Canadian dollar (negative 2.7%). Interestingly enough, these shifts affect negatively gold miners’ returns – a topic worth investigating (again) in more detail.

The ETF community has had a net positive quarter, ending the holdings of the 12 major ETFs at 57.7moz. Comex positions neared 24moz, after some long liquidation towards the end of March. As the longs are less extended, there is little evidence of new shorts coming in. These trends have contributed to the relatively quiet quarter.

The Canadian stocks-dominated gold equity market has had a disappointing quarter, despite the initial expectations of a strong response to 4Q09 returns. The GDX index lost 6.4% and the 50-day moving average has now fallen to the level of the 200-day moving average. The month of January was particularly damaging to the stocks, with the HUI index losing nearly 8% over the quarter. Interestingly, the (imperfectly) Junior market-tracking GDXJ index lost only 4.29%.

Equity-wise, the strongest performance came from a selection of West Africa-focused mid-tier producers – Red Back, Semafo, Golden Star and High River Gold among them. Elsewhere, the winners have been among operators in the Former Soviet Union (Highland, Petropavlovsk and Centerra). Finally, Oceana Gold and Anatolia (both long punted by sell-side analysts) have strongly outperformed the competition. On the other hand, copper-heavy gold stocks (e.g. Newcrest and Yamana) have disappointed again despite 4.67% increase in the copper price over the quarter. They now appear relatively cheap, with Newcrest seeing better cash flow growth – unless smothered again by AUD appreciation. This question is becoming even more prominent in light of Newcrest’s offer for Lihir this morning. Interestingly, Newcrest was slightly up on the announcement.

With the exception of Newmont, this has been a poor quarter for the North American majors. Kinross, in particular, has continued its 2009 losing streak. Newmont has now emerged as the only major company with positive spread of returns over its cost of capital. One can only hope that the full addition of Boddington (copper-heavy, in AUD environment) would not turn the long-hatched blessing into a curse, in disguise.

Elsewhere, expected volume increases are positively correlated with economies of scale and resulting near-term cost performance (e.g. Goldcorp, ElDorado and Randgold), though they come at a price. It is the South African majors that continue to represent a value entry, yet not without hitches down the road, as previously discussed on these pages.

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Tags: currency markets, ETF, first quarter performance, gold equity markets