Gold's Schizophrenia: Pulled Apart By Commodity And Safe Haven Status
Agustino Fontevecchia
www.forbes.com
Gold appears to have entered a new phase, acting as a hybrid,
sometimes sympathizing with risk assets and other times acting like a
safe haven, UBS' Edel Tully explains. While this makes it incredibly
difficult to trade the yellow metal, the gold strategist remains
bullish.
After falling about $20 on Tuesday in response to a stronger dollar,
gold recovered its footing on Tuesday, hitting $1,693.90 an ounce, its
highest level in two weeks. By 1:25 PM in New York, the yellow metal
had given up some of those gains and was trading up $19.50 or 1.17% to
$1,679.20 an ounce.
Gold's relentless climb, when any and all headlines seemed to fuel
the precious metal's bull run, came to an end after peaking above $1,920
an ounce last August, falling almost 20% in a few weeks to bottom out
around $1,562.
Still, the yellow metal remains up about 20% this year and most
analysts remain bullish. It's as hard to explain gold's skyrocketing
rise as it is its precipitous fall; UBS strategist Edel Tully notes gold
is now behaving like a hybrid, acting as commodity or safe haven as
investors try to find balance amid opposing forces.
Tully had said she expects gold to hit $1,920 in a month and $2,100
in three months, but recognizes gold's safe haven't status isn't keeping
it afloat anymore. "Trading the yellow metal [has become] very
challenging, as while one can have a view on an event such as US
payrolls for example, deciphering how gold reacts has become a lot more
difficult. And while buyers are nimbly returning, it is no surprise that
there is caution given the struggle for conviction."
Regardless, gold will continue to react to macroeconomic news,
particularly in Europe. While the yellow metal barely flinched in
reaction to Slovakia's failure to ratify the EFSF (markets appear to
factor in a positive vote sometime this week), the Merkel-Sarkozy
"comprehensive package" could be setting investors up for a big
disappointment, Tully says. "And considering how gold has been behaving
recently, market reaction to euro-negative developments will not be as
straightforward as it has been historically."
Gold miners have been an alternative to holding physical gold, either
via an ETF or through the physical metal. Miners continue to under
perform bullion, though, with the Market Vectors Gold Miners ETF flat in
the last three months compared with a 5% gain for the GLD gold ETF.
Barrick Gold, GoldCorp, and Freeport McMoran are among some of the
underperformers within the mining group.
No comments:
Post a Comment