Gold: Like Summer 2011 Never Happened
Bullion Vault
Wearing its greatest debt burden since WWII, the UK government can now borrow for 10 years at less than 1.9% per annum. The US Treasury is paying 2.9% per annum on 30-year debt.
Does anyone really expect a yield of less than 3% to beat inflation between here and 2042...?
Yet the price of gold – the anti-debt – keeps falling, and it keeps falling despite the imminent failure of Greece's Euro membership and the looming collapse of Europe's banking system. Some €700m per day is being pulled from Greek banks. Global stock markets have fallen over 7% already this month, the broad commodity markets have fallen for 10 out of 11 days, and crude oil is trading at a 6-month low, down 15% from February.
But the distinct differences of gold – un-inflatable, economically useless (relatively speaking) incorruptible gold, with its zero credit risk and 5,000 years of monetary use – count for nothing. In Dollar and Sterling terms, it's now back where it started last summer's big move.
That's precisely what happened in late 2008, when the collapse of Lehman Bros. – and the missed opportunity to let every other over-leveraged investment fraud go bust as well – drove equities, commodities and gold sharply lower.
By mid-October 2008, gold had re-traced the entire surge that started with Bear Stearns' hedge-fund failures of mid-2007, running to the peak above $1000 per ounce when Bear Stearns itself failed into the loving embrace of J.P.Morgan the following March.
Here again in 2011-2012, the crisis proved good for gold at first, but the whole move has been unwound as global credit deflation sucked the air out of Gold Futures and options, and wipe-out losses in other assets forced even true believers to quit their positions.
Gold Prices have the potential to recover, says a UBS analyst to Bloomberg TV. We don't doubt he's right. We just doubt gold's immediate potential given the overwhelming bullishness of every tomfool able to voice his opinion in public.
"Last time we talked, last September or October, you asked what I thought, and I was bullish at $1800," said one MBA with the certainty of a 12-year old to Business Insider a week ago. "Now it's $1660, and I'm still bullish. I'm more bullish than ever."
Good grief! Just think how bullish he must be now gold has sunk another $120. "When all the experts and forecasts agree, something else is going to happen," saysDavid Rosenberg, previously chief economist at Merrill Lynch, now chief economist and investment strategist at Gluskin Sheff and – ummm – an expert by any measure. But what happens when all the fools agree with the experts? It most likely ain't pretty.
read more on this article here
Economic Recovery: Who Are We Kidding?
Seeking Alpha
The global economy is healing, so we are told. Yet the moment the Federal Reserve indicates just that -- and thus implying no additional stimulus may be warranted -- the markets appear to throw a tantrum. In the process, the U.S. dollar has enjoyed what may be a temporary lift. To make sense of the recent turmoil, let's look at the drivers of this "recovery" and potential implications for the U.S. dollar, gold, bonds, and the stock market.
In our assessment, what we see unfolding is the latest chapter in the tug of war between inflationary and deflationary forces. During the "goldilocks" economy of the last decade, investors levered themselves up. Homeowners treated their homes as if they were ATMs; banks set up off-balance sheet Special Investment Vehicles (SIVs); governments engaged in arrangements to get cheap loans that may cost future generations dearly. Cumulatively, it was an amazing money-generation process; yet, central banks remained on the sidelines as inflation -- according to the metrics focused on -- appeared contained. Indeed, we have argued in the past that central banks lost control of the money creation process, as they could not keep up with the plethora of "financial innovation" that justified greater leverage. It was only a matter of time before the world no longer appeared quite so risk-free. Rational investors thus reduced their exposure -- delevered. When deleveraging spreads, however, massive deflationary forces may be put in motion. The financial system itself was at risk, as institutions did not hold sufficiently liquid assets to delever in an orderly way. Without intervention, deflationary forces might have thrown the global economy into a depression.
The trouble occurs when the money creation process takes on a life of its own, because the money destruction process is rather difficult to stop. However, it hasn't stopped policy makers from trying; in an effort to fight what may have been a disorderly collapse of the financial system, unprecedented monetary and fiscal initiatives were undertaken to stem against market forces. Trillion-dollar deficits and trillions in securities purchased by the Fed with money created out of thin air -- when the Fed buys securities, it merely credits the account of the bank with an accounting entry (while no physical dollar bills are printed, many -- including us -- refer to this process as the printing of money).
Will China Continue to Buy Gold?
Bullion Vault
Unless China's growth stalls completely, ordinary Chinese should continue to Buy Goldin large quantities...
Nobody rings a bell at the top or bottom of a market," the old saying goes. Yet anyone reading about the veritable stampede to Buy Gold during last month's Chinese New Year celebrations might have heard a faint ringing in their ears, writes Ben Traynor at BullionVault.
Here are a few quotations from various press sources:
- "Some customers just walk in and buy a bunch of 100g gold bars all at once...Companies come in too to Buy Gold bars for presents." – branch manager, Industrial and Commercial Bank of China.
- "Some companies are giving out gold instead of cash to their employees" – Jia Zhihong, jeweler, Wuhan.
- "With customers crowding and rushing in, we did not even have time to eat and drink." – gold counter sales clerk.
- "People seem crazy about gold, snatching it up more like a cheap cabbage than such a precious metal...You have to quickly decide whether to make a purchase, or it will be taken away by others." – Beijing shopper
- "Think of it like investing in the stock market...Gold maintains its value much better than stocks." – sales clerk, China Gold store.
The classic signs of an investment mania are there. Mass participation, frenzied buying, an established narrative that something is a 'sure thing'. But though this may look like the-mania-before-the-crash, that doesn't necessarily mean we've seen the big peak for Chinese gold demand. We may (or may not) see a wobble in the near future if the economy turns south, but unless you think China's economic development story ends here, there are sound reasons to believe Chinese gold demand remains in its long-term uptrend.
According to World Gold Council data, Chinese gold consumption totaled 207.4 tonnes in 2003. By 2009 it had more than doubled to 457.7 tonnes. More recently, gold imports from Hong Kong, widely regarded as a proxy for total gold imports, tripled in 2011.
China only began deregulating its gold market a decade ago. Until the Shanghai Gold Exchange opened in late 2002, the government held a monopoly on gold ownership. It is possible that the growth in Chinese gold demand could merely represent catch-up, but this seems unlikely given how rapidly China's economy grew over the same period. Ordinary Chinese have been growing steadily wealthier, meaning more and more people have had the wherewithal to Buy Gold.
A working paper by economists Guonan Ma and Wang Yi published last year by the Bank for International Settlements, for example, found that household savings as a percentage of gross domestic product (GDP) rose from 16% in 2001 to 23% by 2008 – a period in which GDP itself regularly grew by 10% or more a year.
The authors also found there was a considerable rise in household's average propensity to save – that is, the proportion of disposable income that is held as savings. One possible explanation for this could be that economic growth has raised more and more Chinese to just above subsistence level, as agrarian workers urbanize and take higher-paying factory jobs for instance. As incomes grow, an increasing number can for the first time afford to save. Compared to those on higher incomes, though, these new savers must save a greater proportion of their disposable pay in order to attain a given level of savings.
read more on this article here
Why Are the Chinese Buying Record Quantities of Gold?
This month, the Hong Kong Census and Statistics Department reported that China imported 102,779 kilograms of gold from Hong Kong in November, an increase from October’s 86,299 kilograms. Beijing does not release gold trade figures, so for this and other reasons the Hong Kong numbers are considered the best indication of China’s gold imports.
Analysts believe China bought as much as 490 tons of gold in 2011, double the estimated 245 tons in 2010. “The thing that’s caught people’s minds is the massive increase in Chinese buying,” remarked Ross Norman of Sharps Pixley, a London gold brokerage, this month.
So who in China is buying all this gold?
The People’s Bank of China, the central bank, has been hinting that it is purchasing. “No asset is safe now,” said the PBOC’s Zhang Jianhua at the end of last month. “The only choice to hedge risks is to hold hard currency—gold.” He also said it was smart strategy to buy on market dips. Analysts naturally jumped on his comment as proof that China, the world’s fifth-largest holder of the metal, is in the market for more.
There are a few problems with this conclusion. First, the Chinese government rarely benefits others—and hurts itself—by telegraphing its short-term investment strategies.
Second, the central bank has less purchasing power these days. China’s foreign reserves declined in Q4 2011, falling $20.6 billion from Q3. The first quarterly outflow since 1998 was not large, but the trend was troubling. The reserves declined a stunning $92.7 billion in November and December.
Third, the purchase of gold would be especially risky for the central bank, which is already insolvent from a balance sheet point of view. The PBOC needs income-producing assets in order to meet its obligations on the debt incurred to buy foreign exchange, so the holding of gold only complicates its funding operations. This is not to say the bank never buys gold—it obviously does—but there are real constraints on its ability to purchase assets that do not provide current income.
Apart from China’s central bank, there is not much demand from the country’s institutional investors for gold. There are industrial users, of course, but their demand is filled from domestic production—China is the world’s largest gold producer. Most of China’s gold demand from foreign sources, therefore, is from individuals.
So why are individuals now buying gold? The easy answer is that the demand is only seasonal, as Jeff Wright of Global Hunter Securities believes. The Chinese traditionally buy gold presents in the run-up to the Lunar New Year, which started a week ago. Yet gift-giving does not begin to explain the surge in gold purchases that started as far back as July. November was the fifth-consecutive month of China’s record gold purchases from Hong Kong.
A better explanation for the gold-buying binge of Chinese citizens is that they are using the shiny commodity as an inflation hedge, as the Financial Times recently suggested. Yet the buying of gold has increased while inflation has eased. And that means there must be another explanation. The best explanation is that individuals in China are using gold as a substitute for capital flight.
read more on this article here
Fed: Benchmark Rate Will Stay Low Until Late 2014
Bloomberg
Federal Reserve officials said their benchmark interest rate will stay low until at least late 2014 and anticipate that unemployment will remain high and inflation “subdued.”
“The Committee expects to maintain a highly accommodative stance for monetary policy,” the Federal Open Market Committee said in a statement released in Washington today. “Economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as more than two years of economic growth have failed to push unemployment below 8.5 percent. Fed officials in a separate statement today lowered their forecasts for economic growth and inflation this year and in 2013.
“What they’re doing is setting the table for some sort of additional monetary easing,” said Scott Minerd, chief investment officer in Santa Monica, California for Guggenheim Partners LLC. “The changes in the statement from last month de- emphasize growth.”
Stocks rose and Treasuries extended gains. The Standard & Poor’s 500 Index climbed 0.4 percent to 1,320.24 at 2:40 p.m. in New York. The yield on the current five-year note fell nine basis points to 0.80 percent after touching the record low of 0.76 percent.
‘On the Table’
Fed Chairman Ben S. Bernanke, speaking at a news conference after the statements, said that the option of further large- scale bond purchases is still “on the table.”
“If inflation is going to remain below target for an extended period and employment progress’’ is very slow, then “there is a case’’ for additional monetary stimulus, he said.
The Fed lowered its forecast for growth this year to 2.2 percent to 2.7 percent, down from a projection of 2.5 percent to 2.9 percent in November. It predicted the economy next year will expand between 2.8 percent to 3.2 percent, down from a previous forecast of 3.0 percent to 3.5 percent.
In a separate statement of its long-range goals and strategy, the FOMC specified a 2 percent goal for long-term inflation, as measured by the annual change in the price index for personal consumption expenditures.
‘Firmly Anchored’
“Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability,” the panel said in a statement. It also enhances “the committee’s ability to promote maximum employment in the face of significant economic disturbances.”
Policy makers declined to specify a goal for employment, saying that it “is largely determined by non-monetary factors.” The committee’s longer-run forecast for the jobless rate is 5.2 percent to 6 percent.
The Fed said it would continue to extend the average maturity of its $2.6 trillion securities portfolio, a move dubbed “Operation Twist.” The Fed also maintained its policy of reinvesting maturing housing debt into agency mortgage-backed securities.
“The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually,” the statement said. “The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee’s dual mandate.”
read more on this article here
The Incompetence of the Fed
The Daily Bell
Inside the Fed in 2006: A Coming Crisis, and Banter ... As the housing bubble entered its waning hours in 2006, top Federal Reserve officials marveled at the desperate antics of home builders seeking to lure buyers. The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was "rising through the roof." But the officials, meeting every six weeks to discuss the health of the nation's economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast. – New York Times
Dominant Social Theme: The Fed gets it right ... eventually.
Free-Market Analysis: Wow, what an article. At a time when many in the alternative media were shouting out loud about an impending financial crisis, many of the top men at the US Federal Reserve could only make jokes about desperate discounts being given out by house-builders that found themselves saddled with an ever-growing inventory they literally couldn't give away.
And who provides this information? Why, the Fed itself as part of an ongoing "openness" about its deliberations. This is, for the Fed, not a generous move but a desperate one. We've been writing about the trouble that central bankingis in and the moves that will have to be made to try to counteract the growing perception that the Fed in particular is a sinecure of the vastly wealthy.
This is a direct result, in our view, of the Internet Reformation that has made it impossible for the power elite to pretend its dominant social themes are grounded in reality. The Fed didn't used to release a narrative of its deliberations. But over time, the pressure to explain this mysterious mercantilist facility has increased significantly. Tens of millions believe in the fear-based promotions of the elite, but millions do not anymore.
Central banking is a good example of just such a fear-based promotion. Invented in England some 500 years ago, the privilege of printing money for the state has been jealously guarded and incrementally expanded by a tiny pool of "central banking" until it has reached its current perfection.
The idea behind central banking in the modern age is that the world's financial system is fragile and prone to breakdown and needs a central clearinghouse to guarantee solvency. The reality is that central banks – particularly the Fed – have garnered a franchise to print money-from-nothing.
The mechanism of the Fed is presented antiseptically in textbooks but the reality is far from bloodless. The few (Anglosphere) families that control the Fed and other central banks around the world have used the literally hundreds of trillions they control to create what is popularly called a New World Order.
They have fully purchased political, military, educational and media facilities in the West and elsewhere in order to propagate the gospel of globalism. They then manipulate current events up to and including wars in order to realize their aim of global governance.
But even as they have approached their goal of apparent total control of the world's political and military processes, they have received setback after setback from an unforeseen facility: The Internet. While it is true that the US's DARPA created the Internet, it was the unanticipated creation of the personal computer that turned a private military facility into a worldwide phenomenon.
The Internet, like the Gutenberg Press before it, has allowed an unfettered exchange of information about the Way the World Works. The result has been a gradual discovery by the masses of central banking and the essential insanity of a system that gives a handful of people the ability to direct trillions to their friends and colleagues.
The inevitable result of the collision of what we call the Internet Reformation and the memes of the elite – specifically central banking – is the gradual creation of a deep dissatisfaction with the Fed and central banking generally.
The elites rely on public acceptance of its memes to govern behind the scenes. If its main methodology of control – central banking – is foundering on the shoals of public skepticism, then the larger plan to create global governance is in jeopardy as well. Without the limitless money and control that central banking provides, the plans of the Anglosphere elite to run the world are not simply in jeopardy, they are likely ruined.
read more on this article here
Why Central Banks Need To Increase Gold Reserves
GoldSeek
Central banks around the globe are increasing their gold reserves with the passing of each day. Before 2009 central banks were net sellers of gold with china, India and other nations as net buyers. Some are explicitly doing it while others are implicit. The reasons are political as well as financial. Just remember that central banks invest only for the long term, say five years or more. Hence they look at the long term perspective and make investment decisions which will strengthen their nation’s finances. Net gold purchases by central banks exceeded 148 tons in third-quarter 2011- their highest ever, according to the London-based World Gold Council (WGC). The WGC said it expects growth in central bank gold demand to continue into 2012. The total central banking purchases amounted to 348.70 tonnes in the first three quarters of 2011- a whopping rise of 270% compared to the first three quarters of 2010.
FINANCIAL REASONS
Central banks as well as investors have lost their faith in currency markets after the turmoil in the USA in 2008 and Europe in 2011. The USA and some of the European countries have a huge trade deficit and are bound to grow at a very slow rate. The USA has a debt of nearly $15 trillion and a current account deficit of over $110 billion. Near zero interest rates have so far been ineffective. Even flooding the markets with free money by the Federal Reserve, the Bank of England and the European central bank has failed. The Federal Reserve has said in 2011 it will protect large US corporations from failing in the future. In 2008 they conceptualized the concept of “too big to fail” for USA banks and financial corporations. Europe, USA and the UK, all the champions of capitalism and capitalism based democracy, are resorting to protectionism in some form or the other.
When any concern (banks or anyone) knows that it will be rescued by their government in the event it nears bankruptcy, their managers, CEO, CFO and other executives working there, will take unlimited risk fearlessly. This is the message sent by the Federal Reserve as well as European central banks (among other nations) to entrepreneurs of their nations. Take as much risk as you can if you can succeed in higher short term growth and employment, as in case of a bust we are there to protect you. This has not gone down well with emerging markets and other countries where there is a call to open their economy while protectionism is being followed by the callers.
The actual value of countries with huge foreign exchange reserves in US dollars and euros is on the decline. Central banks have to find ways and means of reducing the long term purchasing power of their US dollar reserves and euro reserves and all currency reserves. Gold is one of the means. The other example which was seen in the last week of 2011 is a pact between China and Japan to allow their companies to hedge or settle their net receivables/payables in Chinese reminibi and Japanese yen is a step towards this diversification. Bilateral settlement of currencies among nations is a theme which will catch up over the coming years. Every nation now wants to reduce their dependence on US dollars, Euros and other major currencies for their trade.
POLITICAL REASONS
Security and peace is the base for trade among nations. Nations accepted the US dollar as the global medium of trade due to its arms and technology. The USA is still one of the biggest arms exporters of the world. If the USA losses its technological edge and arms export markets then the value of the US dollar will be peanuts. The USA pokes its nose in every nook and corner of the world to expand trade which benefits US companies and US politicians in the long run.
The attack on Libya in 2011 represents modern style of colonization. There are no reasons to attack and kill Libyan ruler colonel Gadaffi. Iraq and Afghanistan’s occupation are also unjustified. The USA and its allies have a theory of pre emptive strike on any nation on various reasons such as “war on terror”, “capacity to build nuclear weapons” and other silly reasons. Getting nuclear weapons is not the monopoly of USA and its allies. But their politicians and military generals think that “nuclear weapons” is their monopoly. Any nation which has advanced weapons should be attacked as it will create instability in the region. They believe that they are the global peace keepers. Whereas they are the colonizers, looters and nothing else. Iraqi people and Libyan people have been looted of their precious crude oil wealth. Afghani people will be looted of their vast mineral resources in the mountains. It was the USA which created “Saddam Hussein” or “Osama Bin Laden” or “Taliban” or even a “Colonel Gadaffi” among other so called global rogue ex-leaders and movements.
read more on this article here
Gold on the Cusp of $3,000+: An Update
GoldSeek
Our work with Gold is based on a “Model” off the late 70’s Gold Bull that has been replicating nicely since we started the Fractal Work with Gold back in 2002 and 2003. Short-term volatile moves in Gold, as we have seen over the past weeks, do not affect our projections based on the model, leaving the expectation of a move in Gold up to $3,000 into mid-year based intact as outline in our previous article entitled Gold Tsunami: on the Cusp of $3000+?
This is no different than our projection calling for Gold going to $1860 to $1920 back in April in an article entitled Goldrunner: Gold on track to Reach $1860 to $1920 by Mid-year. Many thought Gold’s run was finished, but then Gold shot up to tag our $1920 price target on the nose.
The Gold Bull in US Dollars is a parabolic cycle that is created by the fall in value of the US Dollar.
1) The “US Dollar Index” has little relationship to the “Value of the Dollar” once the other paper currencies in the basket are being devalued aggressively. Thus, the Dollar is no safe haven except for very short periods of time late in major Gold Bulls. The global competitive currency devaluation process started in earnest in 2010 - much like it did in the late 70’s cycle. Once the GCCDs start in earnest, the US Dollar Index becomes little but a “fake pricing oscillator”, mostly moving sideways and inversely to the Euro, the largest component of paper currency in the US Dollar Basket.
2) The USD Index is trading much like it did at the same point in the late 70’s once it became a simple oscillator, and the analogous rise in the late 70’s suggests that it will top in the current period somewhere in the 81 to 84 area - and then it will move back down to its lows as Gold rockets higher.
3) Last week gold corrected down into the area of support near its long-term channel uptrend line on the arithmetic chart. The support came at the channel bottom and at angled line support over old tops as seen in the chart below.
Everybody is waiting with baited breath for the Fed to announce the next round of QE while looking at the false pricing index rise for the Dollar. The fact is that the Fed just announced the printing of $600 Billion of new Dollars that are yet to be factored into the $Gold price. That $600 Billion amount is equal to the total amount of the last course of QE that jettisoned the price of Gold in Dollars much higher, and we still expect the Fed to announce a round of QE on top of that so the US Government can pay its bills.
Back in 2007 we had pointed out the expected Deflation Scare correction that was obvious in the late 70’s Fractal Gold Chart. Working off the same Gold Chart Model, back then, we simultaneously pointed out the coming upside into early 2008, and the expected sharp drop into the 4th quarter of ‘08 on the same chart “model.”
There is no equivalent to “another deflation scare” at this point in the cycle off the late 70’s Gold Chart Model, and we believe it is for obvious reasons. The Gold Bull that is created by the aggressive Dollar inflation is driven into the form of a parabola by a relatively constant accelerating inflation of the US Dollar. We expect that the market will very soon turn its attention away from the false pricing Dollar Index, and revalue Gold sharply higher against the US Dollar due to the true increased supply metrics at hand.
read more on this article here
Deflation Can Be Good for Gold
The Street
Gold prices were getting crushed on Wednesday down as much as 5% on deflation panic.
Although gold is typically viewed as an inflation hedge -- a wealth preserver as paper currencies lose value -- it is also a solid hedge against deflation.
Gold tends to get hammered right out of the gate when deflation panic takes hold, but it doesn't last. Take 2008, for example: From the beginning of October 2008 to Oct. 24, when prices hit a yearly low of $695 an ounce, gold tanked 20%. The low was a 32% selloff from 2008's high of $1,023 an ounce.
But over the next year, gold climbed 52% as the S&P 500 rose 23%.
There is a "classic scenario underway right now," said Richard Hastings, macro and consumer strategist at Global Hunter Securities. "A severe correction in gold prices and then, after we get about a 10% selloff, and assuming other conditions are met, then gold would resume a significant rebound back to the $1,725 level and possibly higher."
Gold prices are down 8% this week and Wednesday's price is still only 17% lower than 2011's intraday high of $1,923 an ounce, which means that prices could have more room to fall but doesn't mean the gold trade is dead.
According to a recent report by the American Institute for Economic Research, there have been 15 deflationary events in the U.S. in the past 221 years during which the purchasing power of gold increased by 31%. The average deflation cycle lasted five years, which implies an annual average gain in purchasing power of 6% from holding gold during these times.
"Gold is a store of value even during deflations," wrote Gregg Van Kipnis, chairman, American Investment Services, which authored the report.
"The purchasing power of gold rises because it does not go down in value to the same extent the price level declines," the report said.
"The worse it gets, the better it gets," said Hastings. "The bigger the selloff, the cheaper the entry price for new positions."
read more on this article here
Financial Crisis Gives Investors More Reasons to Love Gold
CNBC
The global financial crisis is giving investors more reasons to love gold.
US investors—both retail and professionals—poured $3.6 billion into gold exchange-traded funds funds last month, quadruple the $813 million in October, according to numbers crunched by research firm Birinyi Associates.
It also was double the $1.7 billion placed in the second biggest ETF category by inflows, investment grade corporate bonds.
Investors are betting that inflation could heat up as many countries cut interest rates—essentially devaluing their currencies—and Europe gets set to inflate its way out of its credit crisis.
“It is going to be a go-to asset once everyone digests that if Europe is to be saved, the ECB will have to directly or indirectly print money and the inflation trade will be all on once again,” said Michael Block of Phoenix Partners Group. “I would be buying gold opportunistically.”
But gold has become more than just an inflation hedge or a safe haven from the world's woes. It's now its own asset class—and one that has outperformed stocks over the past decade.
| ||
0.86 (+0.51%%)The SPDR Gold Trust ETF, which has seen its market value balloon to $73 billion, is now the second-largest ETF behind only the SPDR S&P 500, according to Birinyi data.
And while the SPDR Gold Trust is up more than 20 percent this year, the S&P 500 ETF is little changed. Over the past ten years, the gold SPDR has soared 300 percent, while the SPDR S&P 500 is—again—little changed.
"It is one of the few assets over 2011 that has shown less than 80 percent correlation to financial assets like stocks," said Nicholas Colas, ConvergEx Group chief market strategist. "So it has provided better diversification than most asset classes."
And the betting is that its value will only keep increasing as countries struggle to reflate their economies and resolve their debt problems.
read more on this article here