Gold has plummeted from $1,800 in October, bottoming out at $1,556 a few weeks ago. But since the Cyprus debacle, the yellow metal has moved back above $1,600.
As expected, the gold bugs are going crazy about this. The issue is red meat for them with continued fear of a eurozone breakdown and the folly of central banking and all that.
But this run for gold might not last long — making it more of a brief sprint than a sustained rally.
As Shawn Langlois of MarketWatch puts it:
“Cyprus, we hardly knew you. After a panic-ridden plunge of two points on the Dow last week — yes, two points! — a bailout deal has been reached and stocks are busting out around the world. So that’s it, huh?”
The good bank-bad bank deal leaves small depositors whole, which was the biggest concern fueling talk of contagion or a EU-wide bank run. Large depositors are still on the hook, but defusing that risk to the “little guy” has gone a long way toward calming things down.
Furthermore, the dollar remains strong, and that’s weighing on all commodities from gold to crude oil. Couple that with a resurgent American economy that continues to cement U.S. Treasuries as the safe haven of choice, and it seems there’s not much going for gold behind speculation and sentiment.
Of course, that might be all gold ever has going for it …
At any rate, it doesn’t appear like there’s a tailwind for gold right now after this favorable resolution to the Cyprus issue.
Gold bugs will always find a reason to get into gold. But the rest of us might not find much upside to this investment … particularly while equities are having such a great run.
- Don’t forget about massive gold fund redemptions and cascading risk. (The Slant)
- Of course, what do I know? There’s nothing intelligent to ever be said about gold. (Pragmatic Capitalism)
- Todd Ganos thinks gold is a good five-to-10-year buy right now. (Forbes)
- It remains do-or-die time for gold. (The Reformed Broker)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.