Gold is back in fashion as stocks implode, Bloomberg confirms
Nearly $8 trillion has been sucked from the carcass of the 2016 global equity market so far, and despite the solid pulse in recent days, nobodys in a celebratory mood just yet, wrote Shawn Langlois at MarketWatch on Monday.
Just look at the chart below to survey the damage in stocks:
In contrast, the spot gold price is one of the bright lights in the investment world in 2016. Gold remains the best performing metal on the Bloomberg Commodity Index, which measures 22 materials, in 2016. Its risen 4% this year, Bloomberg reported.
In fact, Bloomberg was forced to admit in a separate story that gold is back in fashion after a $15 trillion global selloff with that $15 trillion figure tallied by tracing stock losses all the way back to May 2015.
The news agency notes that gold is attracting new interest from hedge funds, which more than doubled their net-long position in bullion last week, while holdings in gold-linked exchange-traded funds are expanding at the fastest pace in a year.
Time to add gold to your portfolio: People have become complacent about risks, whether its macroeconomic and geopolitical, George Milling-Stanley of State Street Global Advisors told Bloomberg. Whats out of fashion may be coming back. That atmosphere of people feeling completely calm and untroubled, I think, is starting to go away. Gold is a very good risk-off trade, and I think people are starting to look very, very carefully at the risky positions that they have on a number of other markets.
Golds outperformance so far this year suggests that investors are rebalancing their portfolios in light of the carnage on equities. An entry price here nearer to $1,000 than $2,000 makes a lot more sense, said Kevin Caron of Stifel Nicolaus & Co.
10 reasons why gold can thrive: Blanchard and Company has already noted how numerous punch-drunk stock investors in China are running from sinking equities and returning to gold and other safe havens. Just imagine how the tide could shift back into bullions favor when hundreds of thousands of Western investors realize that much of the stock market bull of the past few years has been the product of the Federal Reserve artificially inflating the markets with cheap money. Without that support, equities have dropped like rocks.
For more arguments on why gold could rebound even more strongly in the coming months, see this article from ValueWalk titled Top 10 reasons gold may shape up for a surprisingly strong performance in 2016.
- The U.S. dollar is a crowded trade.
- Foreign demand for U.S. Treasuries is declining.
- U.S. recessionary warnings are flashing.
- The U.S. credit cycle is turning.
- U.S. equity markets are richly valued and breadth is thin.
- The gold complex is experiencing bullish divergences.
- The physical markets for gold are establishing a durable price floor.
- The gold price should reflect the bloated Fed balance sheet and federal debt levels in 2016.
- Gold is diverging positively from the commodity pack.
- Extended Commodity Futures Trading Commission (CFTC) positioning bodes well for short-term prices.