Net speculative longs in gold (GLD +0.6%) last week fell 16% to 26,774 contracts, according to the CFTC, the lowest amount since June 2007. Shorts rose 6.2% to 79,631, about matching a high set in July. The exit continues in gold ETPs, with assets now off 31% YTD to the lowest level since February 2010.
"There's probably another wave of panic selling ahead," says Sage Capital's Bob Smith, one of those who's exited gold, putting the money in stocks instead. "In the absence of calamity, there's not much to go on."
The last 12 years (prior to 2013) were an aberration, says Morningstar's Samuel Lee. True believers should instead look to deep-value assets linked to gold, namely the miners (GDX +1.3%) - they over-expanded and failed to hedge against falling prices, but a play now is a bet executives have learned their lessons.
An even better idea, says Lee? Admit the worst-case scenarios about global crises and currency debasement never panned out and move onto another asset - nonagency MBS. The cheap, illiquid sector creates opportunities for a good fund manager, he says. Lee's pick is the Pimco Dynamic Income Fund (PDI +0.7%) - an "implicit bet on housing prices."