Is The Metals Selloff A Buying Opportunity? (ETFs: GLD, IAU; CEF: CEF)

Includes: CEF, GLD, IAU
by: David Fry

From DealingFloor: At the time of writing this post (Tuesday 3PM EST), investors are hurrying out of precious metals. Gold is trading around $548 (down $ 22) Silver is at $9.33 (down $0.38), Palladium is $ 288 (down $20) and Platinum $ 1054 (down $16.75). [Gold chart below]

According to Bloomberg the reason for today’s drop is the weaker oil price ($63.25, down $1.85). A drop in the cost of oil eased speculation that inflation will accelerate and erode the value of assets, including equities. However equities are down today as well (S&P -0.75%) as are other commodities, real estate and bonds. So what to make out of all this?

Firstly, we notice that the past few months, basically all asset classes have risen in value (except bonds, which were flat to slightly lower). Some called it asset inflation (the result of too much money around, chasing returns), some called it the result of strong fundamentals (equities on the basis of strong earnings, commodities on strong demand from emerging economies and real-estate on the back of low long-term interest rates). Although all asset classes rose in value (as measured in say dollars, euros or yen), these assets all lost value when measured in gold. In other words: gold outperformed all asset classes. We would say that was