Gold to Bears: Pay Attention
Talk of QE4 (not QE3) appears to be the catalyst for renewed strength in gold, and for risk assets, that means the bullish environment might get even more bullish.
As I grow older, I pay less attention to what men say. I just watch what they do.
Gold has been a disappointing investment relative to equities since the Summer Crash of 2011, but leadership may be just about to return to the precious metal. Despite the "end of the world" trade and negative narrative, stocks have been a better play to put money to work for over a year now. However, SuperBen and the League of Extraordinary Bankers may force gold back into bull mode. Dovish minutes suggesting another round of quantitative easing means that negative real interest rates (i.e. interest rates after inflation) will likely get even more negative. Historically, gold does well in negative real rate environments, which seems to be almost a certainty on central bank paranoia of the economy not reaching escape velocity.
I suspect expectations for coming QE4 are the catalyst for gold. I say QE4 because I consider the fear trade of the last several months into bonds to be the equivalent of QE3, as money poured into fixed income scared about deflation. I spoke about this at length on CNBC in a segment which can be seen here. The next rotation into emerging markets and the metals and mining space seems ever more likely as each day goes by.
Take a look below at the price ratio of the SPDR Gold Trust ETF (GLD) relative to the S&P 500 (IVV). As a reminder, a rising price ratio means the numerator/GLD is outperforming (up more/down less) the denominator/IVV.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.