price of gold
Despite a pullback in gold prices, hold on to your gold. In fact, look to buy more.
You see, thanks to record highs for the U.S. stock market, a notable shift from defensive assets to "risk-on" trades has occurred.
The yellow metal slumped 1.4% to $1,552.80 Wednesday marking a nine-month low. That's after gold prices slid below $1,600 an ounce in Q1 on hints of a global economic rebound. The slide prompted market participants to shed gold holdings.
It's "certainly understandable" for investors to have sold gold following a 400% appreciation over the last decade and move into stocks, said Malcolm Burne, chairman of the Golden Prospect Precious Metals investment trust.
But, here's why the tide may be about to turn.
What Maslow and Rand Would Tell Investors Today (And How It Relates To Gold)
I have always been fascinated by what motivates people. What motivates Tiger Woods to pursue the goal of being the world's greatest golfer?
What's the motivation driving Warren Buffett to continue purchasing companies instead of retiring in Tahiti?
Or how about the motivation behind the trucks allegedly packed with euros parked in front of the Central Bank in Nicosia?
What is most puzzling is the motivation driving investors to buy or sell their equity positions when research shows that holding an investment over the long-term is more successful than timing the market.
As Business Insider puts it, there's "proof that [investors] stink at investing." Its headline is catchy, and the chart shows the evidence, as the average investor has significantly underperformed oil, stocks, gold and bonds in the past 20 years. While, on average, investors returned 2 percent, oil, stocks and gold rose about 8 percent.
After inflation, the average Joe or Jill actually lost money.
Don't Shy Away from Investing in Gold
The most actively traded gold contract, for April delivery, rose $2.70, or 0.1%, to settle at $1,590.70 a troy ounce on the Comex division of the New York Mercantile Exchange.
"The gold market is getting propped up by a break in the dollar index," Ira Epstein, director of the Ira Epstein division at the Linn Group, told The Wall Street Journal. "The problem is, people are not buying into the rally, they're buying it on the dips."
If gold prices cross the psychologically important $1,600-an-ounce level, confidence in investing in gold could strengthen.
Until then, it looks like investors will stay busy trying to profit from the record-high Dow.
Gold Prices: Don't Ignore This Bullish Trend
Gold prices have been languishing in recent weeks as investors have been drawn into riskier assets such as equities.
New highs in major world stock indices including the Dow Jones Industrials and the Nikkei 225 have investors looking for higher returns.
"Investors are not really looking for safe havens at the moment," Eugen Weinberg, head of Commodities research at Commerzbank, told Reuters. "Gold as inflation protection should get more demand from investors in the second half of the year. Right now, the market participants are looking for more yield and they're finding it in other asset classes like equities."
In fact, the amount of gold held by the SPDR Gold Trust (NYSE: GLD) has been declining since it peaked on Dec. 10, 2012. It was at 1,353.35 metric tons then and now stands at 1,244.86 metric tons as money has flowed out of precious metals and into financial assets.
But not everyone is shunning gold - and you shouldn't, either.
Gold and Silver Prices Boosted by These Global Moves
Gold and silver prices both marched toward their largest gains in more than a week Tuesday joining the uplifting mood on Wall Street. As the Dow Jones Industrial Average reveled in a historic rally that took the benchmark to a record high, commodities also soared.
Gold prices settled Tuesday's trading session up $2.50, or 0.2%, at $1,574.90 an ounce, supported by stimulus chatter and a weaker dollar. The safe haven metal had reached as high as $1,585.80 an ounce intraday, on course for its biggest leap since Feb. 26.
Year-to-date, gold has dipped 5.7%. The commodity logged its fifth consecutive month of declines in February, marking its longest stretch of declines since 1997.
Silver prices rose 1.7% to $28.97 in early trading, their biggest gain in more than a week. The white metal ended the day at $28.81.
While silver's slip since January has been more modest than gold's, it's well below the $34.89 it traded at during the same period a year ago.
But loose monetary policies worldwide, geopolitical uncertainties, rising oil prices and renewed fears of inflation should support, if not boost, both gold and silver prices in the months ahead.
Aggressive Global Stimulus Here to Stay
Driving gold and silver prices higher Tuesday were comments from Federal Reserve Vice Chairman Janet Yellen.
At the National Association for Business Economics conference Monday, the Federal Open Market Committee's (FOMC) Yellen defended the bank's $85 billion a month of bond purchases.
"At this stage, I do not see any (risks) that would cause me to advocate a curtailment of our purchase program," Yellen said.
Yellen's sentiments mirror that of Fed Chief Ben Bernanke, who thinks continued stimulus will be good for the U.S. economy. Acknowledging there are risks from the Fed's aggressive efforts to stoke the anemic U.S. economy, Yellen added there are also risks from not being aggressive enough.
This news from overseas is also bullish for gold and silver prices...
Gold Prices Are Being Manipulated and Here's What To Do About It
If you've ever suspected gold prices are being manipulated, you're not alone--and you're right, they are.
Against the backdrop of fiscal mismanagement, political incompetence, and failed austerity measures, the world's biggest traders have all bet heavily on gold. Lately, they've been pulling out all the stops to get what they want while laughing all the way to bigger bonuses.
Today, I want to talk about who "they" are and share a few tricks you can use to capitalize on their actions without being taken to the poorhouse.
Let's begin with the concept of manipulation itself.
In order to understand the players, you have to understand their motivations. You'd think it's all about profit, but that's not entirely true.