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It’s been tough finding winners in financial markets so far this year. Nearly every asset class is moving together in lockstep … to the downside.
But one asset that’s been much maligned in recent years, practically given up for dead in fact, is glittering again: Gold!
The Dow and S&P 500 are both down 8% year to date.
Small caps have it worse with a double-digit decline of 12.2%.
China’s Shanghai Index plunged 20% in the last three weeks alone.
And most commodities are still getting shellacked with nat gas down 6.7% and Oil plunging 15.1% already this year.
But it looks like gold got its groove back in 2016!
In fact, the yellow metal is up 5.3% in 2016 and investors are responding. Buying of “paper” gold through exchange-traded funds (ETFs) and other exchange-traded products (ETPs) is expanding at the fastest pace in 12 months, with the total value of such gold-backed products jumping by $3 billion so far this year, according to Bloomberg.
After a three-year long bear market that saw gold prices plunge 44%, the precious metal is once again glittering in the eyes of investors worldwide.
Perhaps the appeal of gold as a safe-haven asset has finally returned with volatility on the rise in financial markets worldwide.
Institutions and individuals alike are shifting their asset allocation
toward gold as the ultimate risk-off trade!
Gold futures holdings by hedge funds and money managers swung to a net-long position of 1,934 contracts in the week ended January 19. That’s a huge swing in bullish sentiment compared to a record net-short of 24,263 contracts held at the end of December.
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Retail investors have poured $1 billion into precious metal ETFs including the SPDR Gold Trust ETF (GLD) so far this year, on pace for the biggest monthly inflow in a year.
This is quite a reversal of fortune for the yellow metal, which sank to a five-year low in 2015 thanks mainly to a strong dollar and the U.S. Federal Reserve ending its QE money-printing scheme.
Ah, but central banks the world over are still printing euro and yen, etc. with reckless abandon. Even China is devaluating its currency in this global deflationary environment. The result is that gold has actually been appreciating in many foreign currencies for some time now.
Perhaps investors are rushing to buy before precious metals get any more expensive.
In fact about 90% of physical gold demand comes from outside the U.S., mostly from emerging markets including China and India, according to U.S. Global Investors. In China, a record 2,596 tonnes of gold was withdrawn from the Shanghai Gold Exchange last year alone. That accounts for 80% of total global production in 2015!
The People’s Bank of China now holds more than 1,762 tonnes as of December, according to “official” disclosures, but it could be much more than that. Now China’s stock market is crumbling; leaving domestic investors to search for other safe haven investments.
And currency devaluation means gold is getting more expensive for Chinese — and most other emerging market investors. Gold was up 12% in Russia and surged nearly 20% higher in South Africa last year, in local currency terms. And gold is getting more expensive when priced in Canadian and Australian dollars too, not to mention the euro.
In fact, for U.S. dollar investors, the rise in gold is only just getting underway. Could a late-to-the-party buying stampede be just around the corner?
Plus, gold has the three factors I find most appealing as a contrarian investor:
#1: Gold is almost universally reviled after a three-year bear market …
#2: It’s cheap; although difficult to value in absolute terms, in a deeply indebted world of increasingly unstable economies, gold looks like a bargain at just above $1,000 an ounce …
#3: Gold has just started an uptrend, while most other global assets are plunging in value. But no one seems to notice that gold is glittering again … at least not yet!
Good investing,
Mike Burnick
P.S. The free video from Boris Schlossberg and Kathy Lien is now online!
Its called “The Ultimate Wealth Building Tool for a World Gone Mad.”
I urge you to watch it now. It contains everything you need to make 2016 a very profitable year!
Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.
{ 49 comments }
Anybody that can make a five year chart of GOLD would note that we are simply at the downtrend line from October 2012….. Personally, after looking at that five year chart, I’d be prone to say I’d wait a little more, aye?
With all due respect, I’m reminded of the fable about the child that kept calling “Wolf”…. How many times have Weiss prognosticators signaled a “bottom” in GOLD since October 2012?
Do we have inflaton? Impending war? The dollar crashing? Or is it because we have a Democrat in the White House who has saved the us from the Stock Market Crash of 2007 and the right leaning sites don’t like it, despite the fact that this Democrat is doing exactly the same thing that another Democrat did in 1932 after another Stock Market Crash during another Republican Administration?… :(
How quickly a nation forgets. Thanks for the reality reminder, Eagle495.
Origbless,
Thanks for your “Thanks”…… A LOT of people believe what shows up on TV, Radio,Newspapers and the Internet without doing their own research as to the truthfulness of those “claims”….. Few realize that since Reagan loosened the ownership rules in Media, that the majority is now owned by the 3% or corporations controlled by the 3%……. And those folks are willing to spend BILLIONS to keep themselves in power at great cost to the 97%….. Citizens United is a good example of just that…..
Incidentally, ALL of the Stock Market Crashes in our history have happened on the watch of “Conservatives” and ALL the great periods of Economic Expansion and Improving Living Standards for the average American have happened during periods of Liberal Progressive Domination…. 1932-1981 is the most recent example of just that phenomenon……
More wrong dnc talking points. The Dot com bust started under Clinton. This bust which is NOW starting as of Jan 1, will be known as the Obama Bust. And as your old friend Saddam used to say, it will be the mother of all busts.
Go study your history on Wikipedia or Google rather than those radio stations that are owned by the 3%…
One more time 151:
1) 1929-1932 (Hoover) 90% Stock Market Loss
2) 2007-2009 (Cheney/bush) 60% Stock Market Loss
3) NEVER in our history of America has there ever been a stock market Crah under a Liberal Progressive Administration….
I think u missed the CARTER ADMINISTRATION aaaah u missed the big one the depression that happened under FDR ROOSEVELT in 1937 and I suppose it was the conservatives fault for that too you really need to get some glasses eagle495 or should I say mike s.
Conservatives have strong economies, liberals run up the debt! fact
just like how you failed to do your research that a democrat in the middle of his tenure led the united states into another depression in 1937 and the only thing that got us out was WW2 and who was that democrat it was FDR yes frankln roosevelt
Takes years of financial doings to create a crash. Just because it hits the fan when another party takes the helm doesn’t mean they created it. We’ll see what you have to say if it hits the fan again in June! Then we can rightly blame the Liberal Left, since they’ve been calling the shots for the past 8 years. I think the pain will be significant because of the Greenspan-Bernanke debt bubble.
Origbless,
Thanks for your “Thanks”…… A LOT of people believe what shows up on TV, Radio,Newspapers and the Internet without doing their own research as to the truthfulness of those “claims”….. Few realize that since Reagan loosened the ownership rules in Media, that the majority is now owned by the 3% or corporations controlled by the 3%……. And those folks are willing to spend BILLIONS to keep themselves in power at great cost to the 97%….. Citizens United is a good example of just that…..
Incidentally, ALL of the Stock Market Crashes in our history have happened on the watch of “Conservatives” and ALL the great periods of Economic Expansion and Improving Living Standards for the average American have happened during periods of Liberal Progressive Domination…. 1932-1981 is the most recent example of just that phenomenon……
Conservatives are much better for a strong economy.
EAGLE YOU TALK MY LANGUAGE THANKS
oh by the way Barbara I got this from a good source Hillery Clinton wil be indicted
Obama’s got a miserable economy. Lowsy leader. Doesn’t like his own country!
Prints money and lots of it.
fu
Making investing a political comment is a bit out there….
Gold is bottoming, establishing a 10% core now is prudent. I’d buy in gradually, as another pullback is likely.
GOLD had “bottomed” five times since June 2013 and gone nowhere…..
You should stop kissing Obamas ass right now! He had absolutely nothing to do with the market and that being said, 90% of American households have no money in the stock market any way. Obama has caused average working Americans to work harder for less, pay exponentially more for healthcare, while we pay for the “less fortunate ” as you call them, to enjoy our healthcare and our money-aka. Welfare, unemployment, food stamps, etc. wake up Eagle495
Wikipedia and google dimwit….. You’ve been led astray…
Yes, keep believing in Obama. He’s a liar!
A very wise man has been saying that it isn’t golds time yet. Seems though the time frame is very close. He also says that gold doesn’t move on inflation but loss of confidence in Government. That time is also very close. I am taking his advice and watching for a break under $1000.
I am pleased to see Mike recognizing that gold price curves expressed in currencies other than the USD look different from USD price curves. The problem with too many Americans is that they live in a box so they can not see beyond American borders. Much of the world recognizes gold as money, but only physical gold in hand. Here in Vietnam you can even see houses advertised with the price expressed in “teal of gold” (37.5 gram per teal, or about 1.2 troy oz per teal); and this is 0.999 fine gold. Of course, there is more pricing in gold when the local currency exchange is faltering; but some people just want physical gold.
If you really want to “roll the dice”,
go for NUGT and JNUG, (3 times long leveraged gold mining ETF’s)
they move 4-5 % up when GLD (proxi for Gold) moves 1 % up
the same works for a downtrend!!!
Timing is here critical. You have to monitor each day.
Once you have purchased and own a leveraged investment like NUGT or JNUG
then after you have purchased, you better establish a sell order at a specific limit
into your electronic trading account. 10 % swings within a single day are not unusual.
Gold is rising because the yen is falling against all major currencies but especially the US dollar.
All the talk about negative interest rates and about our beloved friend Obama not liking cash transactions and preferring tractable electronic transactions should give credence to physical gold. Should the government ban cash, people will flee to that “mere commodity” called gold. Should the government ban gold, there are other precious metals that could come to the forefront like Platinum or even palladium. The gauntlet could eventually include other precious, portable items. Why do you think the government hates both cash and gold, and wants to brainwash the population to hate gold as well. Once the barn door is open there are too many critters to keep under control. Think digital money, think digital money; and so goes the message.
Oh yes, I should add one more message. Think digital gold think digital gold; and so goes the message.
Needless to say, I hate puppets.
The purpose of eradicating cash is to trap ALL transactions electronically so that governments stop underground commerce and thereby collect more tax money , and probably dictate higher taxes!
Correct David; which is also one of the reasons governments hate gold, silver or plain old barter. They hate gold even more than cash because not only does gold not create its own paper trail, but the limited supply of gold limits the printing press. So how do the cronie big wigs debase gold; sell multiple paper receipts for every ounce in the vault.
Not true. They want to trap the money in the banks, so when they need to re-capitalize these banks, they’ll have your balance to shave. Remember the Cyprus haircuts a mere 2 years ago? That proved a successful experiment, now everybody is preparing to take your money. With a no cash law, YOU CAN’T START A RUN ON YOUR BANK.
So be very wise keep physical cash and buried gold. If everybody does it, we’ll crash the stoopid system and force the reset needed,
Many of those commenting forget the big thing.
That is: It’s Bush’s Fault! And will remain his fault until another Republican is elected.
Just ask Obama or Hillary.
Stop it! Politicians don’t control the American financial institutions. It’s a free market. Or are you as dense as the rest of the liberals?
I got this from a good source HILLERY RODHAM CLINTON will be indicted I see she still tries to blame the FBI investigation as a right wing conspiracy
The Clintons are like herpes they keep reappearing!
Nixon could only dream of the things Obama and Hillary have gotten away with!
Yea! Could larry & Mike show us their gold price predictions since 2012?/
john
For the Dimwits above: Average Annual Stock Market Returns from 1929-2012 based on Presidential Administrations….
Democratic Administrations (40 Years) 10% Annually
Republican Administrations (36 Years) 0.4% Annually
Total accumulated returns if you invested ONLY during Democratic Administrations since 1929: 167 TIMES MORE!…..
No Dimwits, Politics has NOTHING to do with Stock Market returns!….. Geezzz… :(
Eagle495
You may see that political choices are a reason for market place confidence or despair, but not everybody does. Some come onto this site for intellectual enhancement and other views on how to improve their positions. Abusing other bloggers over politics won’t help make anyone richer. It just makes this site content poorer with inclusion of mediocre intellectual views for your single sided arguments. We all get it, you like Bernie.
Actually Howard,
I like making money….. The above is 80 years of economic history…. And when I see many with little or no formal education repeating statements that they picked up on Right Wing Radio, I try to straighten them out or at least suggest that they do a little research to find the truth, lest their investment returns be tarnished because of believing nonsense……
Many stayed out of the markets after Obama was elected because of what was being spewed on right wing radio at great cost to their returns….
Incidentally, much the same was being said in the Right Wing papers and radio after FDR was elected…
It was wrong then and is now….. It really is that simple…
And I DO believe that Bernie would do more for the 97% than anyone else running….. Ever hear of the Glass-Steagall Act? He is the only one that has consistently said it should not have been removed and that it should be returned to law before we have another, even greater Stock Market Crash… G.S. became Law after the Pecora Hearings of 1933 made VERY clear what had caused the Crash of 1929… It worked really well until it was removed by the Right Wing Majority in Congress and Clinton in 1999… Incidentally, Clinton also signed The Right Wing Initiative called NAFTA which removed millions of good paying Middle Class jobs from America…….
Believe at your own peril, but, at least do a little unbiased research, aye?…
I do agree removing the Glass-Steagall Act was a mistake.
Just to add.
Many overseas investors use our markets for a host of reasons. Their interest includes decisions of currency weakness among many others. None I would suggest could give a toss as to which party or POTUS is in office at the time. Liquid markets exist for the transfer of wealth for many reasons and individuals act within many time frames for reasons of fear, opportunity, security and diversity.
No it does not. And again, it means nothing now because the only people with money in the stock market are 1%ers and traders. Where does the rest of the country have their money?? Savings accounts making a whopping 1/4%!! And that’s definitely thanks to our Uncle Obama you moron!
I’m not one of the 3% and I have a lot of money… Grew up dirt poor, served my country (got a heck of a lot of old injuries because of that), went to college on the GI Bill… Used that education to get ahead…..Now I am wealthy, but never forgot where I came from. I’m also willing to help others get ahead…
That said, if you can not take off those right wing blinders and do some independent, unbiased study, you, individually, are screwed… :(
Hi Mike
To some of your points.
1. For the Chinese population and India with no 401k accounts, gold is a dependable store of value for their later retiring years.
2. What woman in the world doesn’t like gold.
3. It is certainly true that the yellow metal is reasonably cheap now.
4. So what will force a change in investment markets back to gold in sufficient numbers.
5. Still far too many bulls in the market place
6. Confidence in unbacked paper gold is still high.
7. Currency weakness and loss of perceived value in unbacked notes will help.
8. We have not seen the global reserve banks throw in the towel yet.
9. When we all get a little smarter and more realise that the currency comparison of golds value is just printed paper, then those who wish to remain safe in longer term positions out of the traditional investment markets will act.
10. Although for many reasons, we have seen a bearish trend, we have yet to see unsustainable production, panic buying of complete loss of confidence.
For these and other reasons some see further down side potential. Hard to tell when though.
Correct Howard. I am happy read writing based on thought rather than based on brain washing about gold put out by the powers that be in order to keep the average person away from gold while the price is still low. As for the when, this is the hard part; but what happens to unbacked paper gold is one sign to look for. In the meanwhile, future orientated people should be accumulating now along with the rest of the world.
Gold is a hedge against the dollar; a strong dollar means lower gold and a weaker dollar means higher prices for gold. The dollar is relatively strong currently thanks to currency wars. We are entering a recession within a Depression. Gold dived in 2009 and while I admit these are turbulent times I would not bet on the immediate future as things could change very quickly or Not?
with this 20 trillion the US owns I don’t understand why gold is not worth more I don’t believe there is that much paper money US dollars to go around
I think there will come a day when there will not be enough paper to go around and there will be a shortage of paper dollars will that make the US dollar go up in value or send gold through the roof
Your thoughts please
I believe that the “value” of gold is just about the most stable “value” of anything in the economic universe, and so therefore the “price” of gold should fluctuate less over time than the price of anything else. The fact that the “price” of gold is so volatile means that the economy and the funny “money” that it runs on is screwed up. I did my own calculation and if you start in 1971 at $42.00/oz and divide the years to reach $1,100.00/oz in 2016 you come up with just under 8% increase in price per year. It’s a mind control trick to use shorter term decreases or increases in the “price” of gold to try to prove any economic or financial point. Some people might know why I picked the year 1971 to do my calculation, if so, you win a golden cookie.