It wasn’t that long ago that gold bears were sticking a fork in the yellow metal. And they had several reasons. The $300+ per ounce price drop was not attracting tons of bargain-hunters. What’s more, the SPDR Gold Trust (GLD) had fallen below its 200-day trendline for the first time since 2009.
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That said, precious metals have reclaimed their luster in 2012. So much so, in fact, GLD is back above its long-term moving average.
How can this be? Wasn’t the rise of the dollar against the euro slamming all commodities, including precious metals? Not when Bernanke’s Fed assures the markets that near-zero rates will not only be set for 2012, not only for 2013, but all the way out until 2014!
Granted, the stock and commodity markets appear to be savoring an endless low-rate environment. After all, low interest rates typically support gold prices. That said, if gold finds itself above $2,200 per ounce and the Fed signals a premature move to combat commodity price inflation, gold bears could be pushing for 40%+ declines.
On the political front, Ron Paul is the one Republican candidate who is getting visibly ill with each new Federal Reserve meeting. Yet, Ron Paul is very unlikely to be president of the United States. On the other hand, until recently at least, it seemed that Mitt Romney might.
Since Romney lost the South Carolina primary (and the Iowa caucuses), and since it is now clear that it may be a long slug-fest for the Republican nomination, the Financial Select Sector SPDR ETF (XLF) has been moving sideways. In the month prior, when Romney seemed to be running away with the nomination, XLF doubled the performance of the broader market.
InTrade.com had an Obama re-election at just 50% when Romney was the clear front-runner. Since South Carolina, Obama's re-election probability has moved to 56% and XLF is underperforming the market once again.
It’s hardly a secret that Wall Street financials (Goldman, JP Morgan, etc.) want a Republican or that they want Dodd-Frank repealed. The markets themselves perceive Romney as having a chance against Obama, and traders talk about it constantly.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.