Friday, August 25, 2017

Gold performance has now moved ahead of stocks for the year

In a repeat from the better part of 2016, gold has now out performed stocks for the year as more and more investors search for value based safe havens in an environment of low yields and interest rates as well as record high P/E ratios.

Also notwithstanding, as the Fed began a policy shift towards raising rates and jawboning lowering their balance sheet exposure, investors are beginning to get out of equities en masse believing that central banks may soon stop their propping up of the stock markets.

Confidence in the American economy has lifted the S&P 500 to an impressive 9% jump this year. 
But gold, which is thought of as a safe place during times of fear, is doing even better. The precious metal has soared 12% this year to nearly $1,300 an ounce, putting it on track for the best performance since 2010. - CNN Money
The vast majority of equity gains in the past 12 months took place between November of last year and into early 2017 as Trump Euphoria led investors to trust that the government would have a deal in place for Obamacare and tax reform sooner than later.  And notably, gold was dumped heavily during that time from around $1360 to $1150 at the start of the year.

And let's not forget the recommendation from Ray Dalio a few weeks ago, who's hedge fund is the largest in the world.
Bridgewater Associates founder Ray Dalio said Thursday that he is concerned about the financials markets given increasing political risks in Asia and domestically. 
"Prospective risks are now rising and do not appear appropriately priced in," Dalio wrote in a LinkedIn blog post. "The emerging risks appear more political than economic, which makes them especially challenging to price in."
As a result, the hedge fund manager recommended investors allocate 5 to 10 percent of their portfolios to gold
"We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit," he wrote. - CNBC

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