Notwithstanding some recent comments by Doug Kass about how gold will be “one of the worst asset classes of the New Year”, my guess is that it will again move higher in 2011, due in no small part to the fact that few investors know or care why the price has risen for its tenth straight year, a reality that is not likely to change anytime soon despite some progress being made in stories like this one at the New York Times.
Some Investors Flourish Despite Economic Tumult
An economy stuck in neutral. Unemployment that refused to go down. And a near financial disaster in Europe.
Despite all the negatives — and a few surprises, like the terrifying “flash crash” of the stock market in May — 2010 proved in the end to be a pretty good year for investors, especially if you were lucky enough to own shares in highflying technology stocks, old-fashioned industrials or gold.
“In many cases, the conventional wisdom was wrong,” said Byron R. Wien, a veteran market strategist at the Blackstone Group. “The market still managed to do well, and the rise in gold and other commodities was a big surprise.”
Bonds may be a traditional refuge in turbulent markets, but it was gold, a haven for value since ancient times, that really shined. Like bonds, gold benefited from a flight to safety spurred by the European debt crisis. But it also raced higher on fears that budget deficits in Western countries, including the United States, are unsustainable and that lax monetary policies would weaken the value of paper currencies over time.“People are disenchanted with paper currencies. They want to own something real, and over centuries gold has proven to be real,” Mr. Wien said.
The returns were real too, with the typical gold mutual fund, including mining companies and a range of precious metals, moving higher by 40 percent. Gold itself rose from $1,096.95 at the start of the year to $1,420.78 on Friday.
To be honest, I don’t know what to make of these comments by Byron Wien. Gold’s rise last year was a surprise, but , he understands why it happened – because people are tiring of holding onto paper money and want something more tangible? That’s been a near constant since the financial market crisis began a few years back and in this item from last April, Wien saw gold prices rising to $1,500 in 2010.