2008 Was Golden...Barely

By Brad Zigler

The start of a new year is usually punctuated in the financial press with all sorts of look-back stories amid the forecasts for the upcoming 12 months. No matter what rags you read, I'll bet you found precious few wistful expressions of nostalgia for 2008. By and large, all the indexes finished the year on a sour note. Even the once-ascendant commodity benchmarks faltered.

Some long-only commodity products, though, are still ahead of their 200-day moving averages. Not surprisingly, these are Precious Metals trackers, particularly those based on gold. It's a pretty short list. After all, few exchange-traded products of the commodity stripe have actually been around for 200 trading days.

Mature Long Gold Exchange-Traded Product Performance

(07-Jan-08 through 06-Jan-09)

	Ticker	Type	% Above 200-day MA	1-Yr Return	Volatility	Average Volume	Liquidity Index	Current Spread
SPDR Gold Shares Trust	GLD	Trust	3.1%	0.4%	32.8%	13,743,753	9,322,523	.01%
iShares COMEX Gold Trust	IAU	Trust	3.2%	0.4%	33.1%	474,314	316,633	.04%
PowerShares DB Gold Fund	DGL	ETF	1.5%	-2.8%	33.4%	59,806	37,014	.19%

So, gold products just barely eked out a gain for the year. Well, two of 'em at least. The negative return generated by the PowerShares DB Gold Fund (NYSE Arca: DGL) can be blamed on contango – the price spread between near- and distant-term futures deliveries. The SPDR Gold Shares Trust (NYSE Arca: GLD) and the iShares COMEX Gold Trust (NYSE Arca: IAU) products are based upon physical metal, not futures. No futures, no contango.

With contango now running large, 2009 should shape up to be an even more interesting year.

Comments

[Anthony Alfidi:]

Gold has room to grow even if the fiscal stimulus gets larger. Federal spending on construction and purchasing will bid up the costs of both labor (wages) and materials (prices). That's how we get the classic wage-price spiral that triggers inflation in the midst of larger economic stagnation.

Inflation is always and everywhere a monetary phenomenon. With banks unwilling to lend, that avenue for the transmission of newly printed dollars into the economy is closed. Massive government spending in WWII did not lead to inflation because of price controls and rationing; no such constraints are in place now.

Jan 07 11:55 PM