Gold held up better than stocks, with the GLD down 1.1% on Friday, while the Dow lost 1.5% and Nasdaq tumbled 2.2%, dragged down by Google, and new weakness in Apple. Gold has experienced a remarkable bull market run from $250 an ounce in 2001 to $1,900 an ounce last summer, has not had an easy time of it since.
Three times it has plunged as much as 19%, and rallied back, only to run into resistance each time at $1,800. It is potentially doing so again.
That’s probably puzzling investors who have been seeing so many big-name analysts and fund-managers become very bullish for gold, with reasoning that seems sound.
The latest Reuters poll shows precious metals analysts have become more bullish for gold and silver than they have been in several months.
Even technical analysis was backing the bullish outlook. My technical indicators triggered a sell signal on February 19, almost exactly at that peak, but had me and my subscribers back on a buy signal in mid-August and back into a 20% position in the gold etf GLD.
The case for gold, at least from the fundamental side, still sounds bullish.
As Ray Dalio, chief investment officer at Bridgewater Associates, the world’s largest macro hedge fund recently told CNBC viewers, “We have a situation where there is too much debt, which leads to central banks printing money, which is bullish for gold.”
Other analysts add that fears of the looming ‘fiscal cliff’ in the U.S., and possibility that rating agencies will downgrade the credit rating of the U.S. again, are positives for gold over the next several months.
There is also the expectation that the Fed’s latest QE3 program will be inflationary, and gold is the traditional hedge against inflation.