Gold’s Plummeting Popularity

Many investors have been rewarded by the price of gold this year, but not everyone. If you bought near gold’s 10-year peak of $1,002.80, you’re looking at a 26% loss. In fact, gold has lost nearly 20% in just the last 60 days.

The S&P 500 Index (.INX), meanwhile, has lost even more – close to 30% during that same period. It’s interesting that gold hasn’t been buoyed higher by the market’s recent plunge.

Generally a safe haven during times of economic uncertainty, it appears that the “smart money” believes gold doesn’t offer that right now.

Making things worse, volume has been down in recent months. Fewer people are moving the market, and it’s leading to exaggerated ups and downs. It’s lead many professionals to choose the wait-and-see approach, and it’s why the CBOE Volatility Index (^VIX) is near all-time highs.

While there are successful examples like Warren Buffett, who in light of the market’s weakness have made spectacular purchases of Constellation Energy Group (NYSE: CEG), ConocoPhillips (NYSE: COP), Goldman Sachs Group (NYSE: GS) and General Electric Co. (NYSE: GE).

Others haven’t been as successful. Bill Miller’s value fund, the Legg Mason Value Trust Fund (LMVTX) is seeing its worst year ever.

Louis Basenese believes there is only one indicator to watch right now. The Baltic Dry Index (BDIY) measures shipping volumes and cannot be speculated on. It gives us one of the best barometers for the health of global trade, which could be the driver for pulling our country out of its economic slump. 

Companies mentioned in this article: CEG, COP, GS and GE

 

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