Why isn't Gold Soaring?Jul 02, 2012
Despite an ideal macro-economic backdrup, gold prices are underperforming major asset classes from stocks to REITs.
Gold is among this year’s most disappointing performers. Since the beginning of the year, the SPDR Gold Shares (NYSEArca: GLD) has eked out a gain of just 2.1%.
After hearing pitch after pitch about how Europe’s sovereign debt crisis (NYSEArca: EZU) would drive gold prices past $2,000 per ounce, many goldbugs are starting to rightly fret.
Instead of finding a bull market in Europe’s sovereign debt crisis, gold’s year-to-date performance is closely mimicking the broader commodities group.
The GreenHaven Continuous Commodity Index Fund (NYSEArca: GCC) has lost 5.21% year-to-date, as prices in crude oil (NYSEArca: USO), cotton, and copper continue to fall. Meanwhile, precious metals (NYSEArca: GLTR) have declined by more than 9% over the past three months and are barely holding onto their yearly gain.
Gold, like the rest of commodities, has not been able to overcome sluggish global economic activity.
Maybe one of the reasons gold hasn’t been soaring is because of herding. Whenever large crowds convince themselves of something, usually the exact opposite occurs.
Morgan Stanley (NYSE: MS) forecasts that gold will reach $1,677 by the end of this year because central banks are fluffing world economies with stimulus.
Bloomberg’s latest gold survey shows 21 analysts recommend buying or holding gold, while ten don’t.
Here’s a quick snapshot of recent gold headlines:
“Proposed Banking Regulations would Drive Gold Prices Higher” – Zero Hedge
“Bullish Outlook for Precious Metal Sector Holds” – Minyanville
“Why Gold Can Go the Distance” – Seeking Alpha
Buy Gold at Any Price, Not Working
Right now, the buy-and-hold strategy for investing in gold is not working. If you bought gold at the beginning of the year, you’ve underperformed major asset classes like U.S. stocks (NYSEArca: VWO), real estate (NYSEArca: RWO), and long-term U.S. Treasuries (NYSEArca: TLT).
Investing or trading gold isn’t something that should be done blindly or based upon emotion – as so many are doing today.
The ETF Profit Strategy Newsletter provides key support/resistance levels for gold and monthly income strategies for turning bullion into cash flow.
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