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VIDEOGold: A Currency That Can't Be Printed
We may be close to a moment in time where, over a reasonable period, this sector proves to be an area of relative if not absolute strength.
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On the subject of gold, Justin Mamis shared an interesting observation this morning -- and remember, he's looking at this from a technical perspective -- regarding gold stocks: "No other sector or group seems independently positive." That this group might be a standout performer was a thesis I espoused about nine months ago, thinking that while other types of businesses might have trouble in 2010 and prospectively, the gold miners could have the wind at their back.
Time Isn't the Only Thing That's Money
Early in 2010, when Goldilocks ruled, lots of companies were putting up good numbers and folks were pretty happy, feeling that the worst had been seen and good times were about to roll. Now that the Goldilocks concept has again been seen for the farce that it was, more people have begun to understand that central banks and governments are in a box, and the need for the protection gold offers has therefore become clearer.
Given that gold stocks are benefiting from the metal itself rising faster than mining expenses (not to mention the fact that many of those companies will benefit from the recent bounce in the dollar), a number of them are in a position to experience strong quarters. Last, and perhaps most important, I think that investors everywhere are beginning to understand that gold isn't simply a "bet" on an outcome, i.e., inflation, deflation, stagflation, or "risk on." It's an investment in the world's oldest currency, one that cannot be printed.
In any case, there have been many, many days when the thought of gold stocks actually performing well in any environment -- much less one where stocks generically weren't -- seemed quite laughable. (As we're all aware, there's been no shortage of occasions when the miners have been pounded for no particular reason.) But we may be close to a moment in time (certainly not every day, and certainly not today) where, over a reasonable period, this sector proves to be an area of relative if not absolute strength.
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