Futures For You by Carley Garner
IS GOLD STILL SHINING?
Gold has dramatically underperformed
recently. Is this the new norm?
The truth is, there is nothing normal
about markets or trading them. The
current environment encompasses
market sentiment and volatility levels,
but tomorrow could be dramatically
different. Accordingly, what you assume
to be the norm won’t necessarily carry
into the future.
Since posting an all-time-high in September
2011 near $1,900, the asset class
once revered as a safe haven has been
tearing holes in investment portfolios.
Just as traders and investors were willing
to jump on gold’s bullish bandwagon,
the speculative community has turned
on the yellow metal with vengeance.
Nonetheless, at the precise time gold
felt most bullish a few years ago was the
exact time it was topping out. We feel
like the eventual bottom in gold will feel
the same; the moment in which the bulls
are desperate for relief and the bears are
salivating for yet another new low will
be the point at which a magnificent price
reversal will be possible. At the time of
this writing, we were assuming this scenario
would be looming within the July
time frame. Once the tides turn, the pain
felt by the latecomer sellers, or simply
market chasers, will be fierce.
If you've been reading this column
over the years, or have followed our
newsletters, webinars, or other commentary,
you are likely aware that we
are not necessarily believers in the gold
story. We are quick to remind investors
that gold has its limitations as an investment
product. It doesn't pay a dividend
or a coupon payment, and, aside from
the value humans place on it, it isn't
worth much. After all, it is too soft of
a metal to be used for most industrial
purposes. If it weren't for our obsession
with history and the gold standard, it
would be just another element on the
periodic table. Even so, when it comes
to the financial markets, perception often
goes much further than reality does. Accordingly,
we feel as though speculators
will eventually fall back in love with the
idea of hedging inflation and economic
risk with gold.