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He has been bullish for some time now. Yet gold has been down for a few years. He does make a good case for gold. Is he early to the races or just making the wrong bet. I would like to hear your opinions on gold and where it will go from here.
Over the course of the past 5 years, gold moved from just under $1,400 to $1,203. Is gold not internationally priced in USD? If the dollar is strong, it would take fewer dollars to buy gold. Why would the price rise? I think his case is that it's a good bet not to SINK, that's all--- given global deflation. It's protection, not profit. But I'm a rank amateur. I know nothing, just like Sergeant Schultz. http://data.cnbc.com/quotes/@GC.1
Another thought would be emerging markets. I did notice that one of the panel suggested them and Gundlach shook his head in agreement. I currently own very little in that arena.
I have been building a small position in gold through SGGDX. My target allocation to gold is about five percent of the growth area of my portfolio. Currently, I am at about two and one half percent. From my research I have learned that the all in cost to mine an ouce of gold is about $1,250.00. So, I am wanting to build my position when gold is selling back of its all in cost to mine. The same with silver. Silver is now selling back of its all in cost to mine. In time, I am thinking that gold and silver will have moved upward as domestic stoocks, in general, are now selling at a premium. When stocks pull back to a more resonable valuation then I am thinking gold and silver will move to a higher valuation as stocks pull back.
In addition, I have been adding to my foreign small/mid cap fund. I have also been buying funds that were heavy in energy and materials but now that materials and energy have moved back close to full value I am no longer adding to these positions. My current allocation to emerging markets is about five percent so I am not doing much there either.
With this, I am building cash and awaiting summer.
I don't think I'd want to bet against Gundlach in this case but I'm not sure I want to bet with him either. As @Crash mentioned, a strong dollar, with all else equal, should cause weaker gold. At the moment inflation doesn't seem like it's right around the corner and while some crazy geo-political event can cause a shock that would make gold a good place to be, that just makes gold a good insurance policy rather than a good investment.
If it gets back down in the neighborhood of $1140/oz. then I'll be more interested, but for the time being I'm just a watcher.
Gundlach has a good record on his predictions but I cannot figure out his view on gold. It is not clear to me that gold is something to buy into right now. As for the EM, they have had a bad period. Maybe they are due for a rebound and maybe this is a dead cat? I suppose I am one who needs more confirmation before making a move.
Ya, I'm not rushing to buy gold. Not a precious metals guy, by constitution, anyhow. I remember the run-up in silver and gold during the Iran Hostage Crisis. Whoa. So long ago. How did I get to be 60? Jeez.
Maybe it's changed in the last month or so, but in March he was bullish on gold because he viewed the yield (zero) as attractive compared to sovereign debt in Europe (negative) and anticipating that yields on sovereign debt would go even lower because the net supply after Central Bank purchases is very small. He also noted that Central Banks had been buying a lot of gold in the last 4 years and noted that is supportive as well.
I understand there are some rumors going around that India's Central Bank was considering effectively confiscating people's gold, melting it down and letting jewelers use that gold to sell to new buyers. This is because imports of gold are a significant portion of their trade deficit so creating an internal supply of gold would reduce imports and help reduce the trade deficit. I can't really imagine this would actually be true, I think it would likely result in capital fleeing India (if they can take your stuff I don't want to give them a chance to take my stuff) and cause a government with a lot of support around the world to lose much of it. Nonetheless, apparently the rumors were out there.
Emerging markets have been doing better than the US recently and many seem to think it will continue. I'm a big believer in emerging and frontier markets so I think they will do well over the long-term, but I also prefer places that aren't as commodity dependent because commodities aren't really what I want to invest in in these cases.
Part of the problem with the price of gold is that it's expressed in dollars. And you are all aware of how well the dollar has been doing relative to other currencies. This has made it cheaper for us and pricier for everyone else. I imagine the price is settling to where int'l demand can pickup. This could continue for some time. Makes it a very tough market to play but makes it easy to acquire an investment stake.
I've been expounding for years that everyone should have a small percentage of their wealth in precious metals and stand by that advice today. By small, I mean 3-7%. Think of it as a security blanket. More than this is speculation. Speculation is fine and dandy but it's not a game when you play with real money.
Disclosure: Long time holdings in PRPFX and TGLDX. Spec plays on silver juniors SVLC, SVM, and GPL.
Comments
http://data.cnbc.com/quotes/@GC.1
I would not own the miners as anything but a trade and I don't like to trade like that anymore, so wouldn't be my thing.
In addition, I have been adding to my foreign small/mid cap fund. I have also been buying funds that were heavy in energy and materials but now that materials and energy have moved back close to full value I am no longer adding to these positions. My current allocation to emerging markets is about five percent so I am not doing much there either.
With this, I am building cash and awaiting summer.
Old_Skeet
If it gets back down in the neighborhood of $1140/oz. then I'll be more interested, but for the time being I'm just a watcher.
I understand there are some rumors going around that India's Central Bank was considering effectively confiscating people's gold, melting it down and letting jewelers use that gold to sell to new buyers. This is because imports of gold are a significant portion of their trade deficit so creating an internal supply of gold would reduce imports and help reduce the trade deficit. I can't really imagine this would actually be true, I think it would likely result in capital fleeing India (if they can take your stuff I don't want to give them a chance to take my stuff) and cause a government with a lot of support around the world to lose much of it. Nonetheless, apparently the rumors were out there.
Emerging markets have been doing better than the US recently and many seem to think it will continue. I'm a big believer in emerging and frontier markets so I think they will do well over the long-term, but I also prefer places that aren't as commodity dependent because commodities aren't really what I want to invest in in these cases.
Part of the problem with the price of gold is that it's expressed in dollars. And you are all aware of how well the dollar has been doing relative to other currencies. This has made it cheaper for us and pricier for everyone else. I imagine the price is settling to where int'l demand can pickup. This could continue for some time. Makes it a very tough market to play but makes it easy to acquire an investment stake.
I've been expounding for years that everyone should have a small percentage of their wealth in precious metals and stand by that advice today. By small, I mean 3-7%. Think of it as a security blanket. More than this is speculation. Speculation is fine and dandy but it's not a game when you play with real money.
Disclosure: Long time holdings in PRPFX and TGLDX. Spec plays on silver juniors SVLC, SVM, and GPL.
and so it goes,
peace,
rono