Why Gold Has Been on a Tear in 2016 [UP 15% SINCE JAN. 1]

Fortune ^ | February 9, 2016 | Aaron Task

[expat_panama]

The stock market is having a horrible time so far in 2016, with the S&P 500 down more than 9%. Gold, on the other hand, is up nearly 10% year-to-date and hit a four-month high of just under $1200 per ounce on Monday before dipping 0.7% Tuesday to $1189.30. It's a bit of a cliche to say that people turn to gold in times of uncertainty: Sometimes that works, sometimes it doesn't. Gold did phenomenally well from 2000-2011 but really suffered after hitting nearly $2000 per ounce in 2011. From 2011 to 2015, the yellow metal pretty much fell in a straight line amid the European financial crisis (remember Greece?), ISIS's rise, Russia's annexation of Crimea and quasi-invasion of Ukraine, among many other moments of 'uncertainty.'

So why is gold rallying?

Historically, gold tends to do best when people are worried about inflation...

Meanwhile, China's foreign currency reserves are at a three-year low...

So what should investors do?

In the past few years, a number of people, including The Blaze founder and conservative icon Glenn Beck, have been touting the virtues of gold. You're probably seen the commercials on late-night TV -- usually moderated by someone with a British accent -- and heard the predictions of Gold $3000! Gold $5000! Gold $10,000!!

If you're one of those people who has believed THE WORLD IS ENDING -- BUY GOLD! -- I recommend you use this recent rally to lighten up, meaning SELL some of your gold.

On the other hand...

Depending on your level of risk tolerance, gold should be anywhere between 2% and 10% of your portfolio, but not much more than that -- because the world is only going to end once, and how are you going to collect on your bets if it does?

[expat_panama]

Ah, forgot to mention that gold is down by a third since five years ago. Sure some folks know how to get rich buying/selling gold, and others do it w/ silver, copper, grains, currencies, I'm just on one of 'em.

More metals info at http://www.cmi-gold-silver.com/gold-silver-daily-spot-prices/

[dp0622]

been making a few bucks the past week going long eur/usd.

expect 1.17 and will take it from there.

if the USD reverses its 8 year run, gold could see over 2k.

the problem with gold going to 15k an ounce is, you probably wouldn’t want to live in a world where gold is 15k an ounce.

from the long term angle, there you need an investment pro :)

[Alberta's Child]

My rule of thumb is to stay away from any asset class that is advertised all over TV and radio.

This model has served me well over the years. Once you see Erik Estrada or some other lame A-hole on ads and infomercials hawking the "next big thing" in real estate, it's time to get ready for another real estate collapse.

[Read Write Repeat]

With tech imploding again, gotta put the money somewhere.

[Pontiac]

Depending on your level of risk tolerance, gold should be anywhere between 2% and 10% of your portfolio, but not much more than that -- because the world is only going to end once, and how are you going to collect on your bets if it does?

Depends on your definition of the world.

If you mean the world economic system (which is why you buy gold) I would say that it has ended several times in history.

Rome is the largest of these world economic systems (my opinion) that ended and brought down a big portion of the wealth accumulated in the world.

[winner3000]

My rule of thumb is to buy the most hated asset class of the time and hold onto it for the long run until it is beloved and sell into that. Gold has been hated for years and years now, and some gold miners have been even more hated, selling below their cash reserves as if gold were headed to $700-800 range! Buy low, sell high. It should be simple, but it’s amazing how many people thought the stock market was too risky to invest in when the DOW had crashed to 7000, but started throwing all their hard earned money after it had more than doubled! Same thing is happening with gold and gold stocks right now. Some gold companies are selling for pennies on the dollar, and people keep saying how risky they are because of their PAST performance!

[RegulatorCountry]

Precious metals are one safe haven in times of economic turmoil. It’s also been subject to apparent manipulation over the past couple of decades. When the fear outstrips attempts to suppress value, then it’s going up. When it doesn’t, it stagnates or falls. Currency valuations also play a role. It’s not a simple matter of inflation equals increasing gold or silver price. There’s a lot of psychology involved. That said, there’s a certain level of fear now, and gold is creeping back up again. Jump in if you think it’s going to continue. It might.

[Mr Apple]

...hit a four-month high of just under $1200 per ounce on Monday before dipping 0.7% Tuesday to $1189.30.

I like gold. I like Am 1oz gold Eagles, Canadian 1 oz gold Mapleleafs and 1 oz gold Krugerrands but my guess is that gold will settle back to the $10.90 level and stay at that level all this year. Gold will spike but drift back to the $10.90 level (again, my guess.) I think that the real bargain now is silver. I like silver at this level of $15.38. I was posting last week to buy silver when spot was $14.50ish. I prefer 1 oz silver Canadian Mapleleafs and the 1oz silver Mexican Liberatad. Buy now is my advice to all. [get gold and silver quotes at kitco.com -only 10 min delay but don't buy from kitco; you'll get better quotes from local coin dealers /call 2-3 to compare quotes]

[Mr Apple]

(just now,at 5:25 cst, I see spot silver at $15.66 oz / up 34 cents oz overnight)

[1rudeboy]

My rule-of-thumb is to bail as soon as the company changes its name for whatever reason, e.g., Silicon Graphics to SGI. It's worked every time.

[Alberta's Child]

That's very interesting. I'll have to keep that in mind.

FWIW, my company just re-branded itself and (partially) changed its name ... and I'm looking at other career options (for a number of reasons).

[expat_panama]

Happy day after Ash Wednesday!  While silver's just topped where it was last Nov., gold jumped to an 8-month high and metals futures are standing pat w/ a -0.01%.  Stock index futures are scared to -0.49% after yesterday's flat outcome in falling volume. 

Anyone here into short sales?

Today's "Claims Day" at the report factory:

8:30 AM Continuing Claims
8:30 AM Initial Claims
8:30 AM Continuing Claims
10:30 AM Natural Gas Inventories

New econ threads:

• Economic Libertarians Will Have a Friend in Ted Cruz
• Something Very Disturbing Spotted In A Morgan Stanley Presentation
• How Fears About Recession Could Become A Self-Fulfilling Prophecy
• $100 Trillion Up in Smoke
• Portfolio Moves As U.S. Recession Signals Intensify
• White House forecasts fastest economic growth in decade...? Where-Washington D.C.?

[1rudeboy]

Danger, Will Robinson! Danger!

[DannyTN]

Cruz want s us to go back to the gold standard for currency. Can you imagine your dollars purchasing value jumping around like gold? Down 20% one year up 20% the next subject to speculators like Soros? No thanks. Cruz is incompetent when it comes to the economy.

[Attention Surplus Disorder]

I wish I agreed w/you on silver. This is of course what makes a market. I own plenty Ag and some gold, not as much as I would like but I suspect it is going a lot lower.

Why? Liquidity. More accurately, lack thereof. Worldwide margin call. CASH is the most hated asset, not gold, silver or stocks.

Gold is MUCH closer to its cost of production (COP) than silver. My research put the avg cost of producing gold maybe $950 - when oil was high. Crashing fuel lowers this cost, I would entertain $875.

What is the COP for silver?

I maintain it is ZERO. Yes, ZERO. Other than Hecla, there is no such thing as a silver mine. All silver is produced as a by-product of zinc & tin mining as a “freebie”. An Eagle or even a generic form has somewhat less than $1/oz seignorage, coining cost. Eagles, more like $3. Allegedly, they return the high coining cost on sale. Uh huh.

Gold is a traditional hedge against INflation. It is a complete PITA in deflation. It does terrible in deflation.

Just an opposing view. I bot most of my silver (other than what I originally acq’ed in 1965) at $4-5-7 in Y2K times. Bot for 5, sold for 6.5, bot for 6, sold for 7.75, etc etc and the best thing I ever did in Ag was to sell well over 200 lbs at $38.50.

When I started re-buying Ag, oil was about $20/bbl. I think it bottomed @ $18 in Y2K. Where is oil headed now?

The Fed has been trying with all its might to create inflation and trying with all its might to stave off DEflation, which is what I believe we face. It has not worked.

CASH Is an absolutely valid investment vehicle and when the SHTF, will buy a hell of a lot more than it does in booms or boomlets.

Just an opposing view. I believe gold is simply another commodity. It’s like permanent wheat. In deflation, commods get slaughtered.

[The Truth Will Make You Free]

I think his basic thought is that dollars should be backed by an asset instead of being an instrustment of debt (note) which is continually losing value through inflation.

BTW, the common definition of inflation is "an increase in prices". However, that's not the traditional definition. I went back to my high school dictionary which defines inflation as "an increase in the money supply which leads to an increase in prices". That's vastly different. The increase in money supply has already happened. It's only a matter of time before prices increase. I'd suggest reading Richard Maybury's books, website, or Early Warning Report. To think that politicians and bankers can be trusted with the economy is trusting in shifting sand.

[StAnDeliver]

"I recommend you use this recent rally to lighten up, meaning SELL some of your gold."

Definitely a sell-into rally.

[Mr Apple]

Eagles, more like $3.

Excellent, astute post ASD. And I agree, Am Eagles -gold and silver- carry a hefty premium, but as you say, you get more then spot when you sell, so it's a wash.
And actually, I suggest buying the plain 1 oz silver bars with or without the ridiculous etchings on them. And of course, the best value when buying silver is to buy one hundred oz bars!! Far, far less premium then all the 1 oz coins.
(when buying 100oz bars, just make sure to buy from reputable, well established coin dealer because from time to time there have been reports of 100 oz bars having been tooled out and were partially filled with lead. Get and save your receipt from that coin dealer) Ask on silver now at 6:15 cst $15.61

[Mr Apple]

Definitely a sell-into rally.

Yes, gold, I agree. (but not sell your silver)

[expat_panama]

safe haven in times of economic turmoil.

We hear people say that about gold, especially those that are trying to sell gold, but during the last crisis gold went wild down and up the whole time ending back where it was --

--after having risen so nicely before the crisis.