When the pall bearers and grave diggers start dancing on gold’s grave, it’s usually a good time to buy.
Here are a few articles that will have contrarian ears perking up.
Barron’s proclaims The End of a Golden Era
Gold is struggling. The election of Donald J. Trump as U.S. president was supposed to increase market volatility and push investors to safe assets. Volatility has risen, but investor sentiment has shifted toward hopes of better economic growth through fiscal stimulus, tax breaks, and infrastructure investing.
Adding further pressure on gold prices, the Federal Reserve cited a recent uptick in various U.S. economic measures as justification for raising interest rates in mid-December, just its second hike since 2006. Because gold doesn’t pay interest or dividends, it was already having a hard time luring investors from assets whose yields were increasing, even before the central bank made higher rates official policy.
With one of Trump’s central economic themes being the need to increase infrastructure investment, industrial metals and the stock market in general have fared better. In contrast, gold is this year’s worst-performing metal.
Outflows from exchange-traded funds focused on precious metals have reached levels not seen since the 2013 gold plunge. Gold funds experienced $700 million in outflows from Dec. 8 to Dec. 14. During that period, equity funds attracted $21 billion, their ninth-largest total ever.
Modestly stronger U.S. economic expansion and the potential for a rise in inflation propelled by Trump’s spending plans already are setting the tone for more Federal Reserve rate hikes next year. Translation: more downward pressure on gold prices.
Pain for Gold and Real Estate
Last month the Financial Times reported Death of India’s big bank notes spells pain for gold and real estate
Bell Tolls for Gold
Today, Financial Times writer “Lex” gave this morbid headline Gold: For Whom the Bell Tolls. (Premium Content)
Peter Atwater, not even a gold bug, caught the sentiment, announcing “This death of gold story suggests a major low is near.”
His comment seems far more likely than not.
Atwater is author of Moods and Markets.
Mike “Mish” Shedlock