Bullion surges to 6-month high

The value of gold plunged 28.3% in 2013, bringing to a screeching halt the yellow metal’s 12-year win streak. With increasing numbers in 2013,  analysts put their bear claws into gold and declared the bull market over.  Just this past January Reuters news service, in an article titled “Gold bull market ‘firmly in rear view mirror’,” reported about its survey of 37 analysts whose consensus forecast is for gold to finish 2014 at $1,235/oz.

Well, gold bullion is off to its best start to a year since 1983, closing today at $1,367.30/oz. SPDR Gold Shares (GLD), my proxy for the gold market, is up 13.4% so far in 2014. While gold has certainly been a beneficiary from uncertainty surrounding the Ukraine-Russia conflict, the metal has actually been climbing since late last year. In February GLD recorded its first monthly inflow since December 2012.

As you can see on my chart, gold found its footing in December, surpassed its intermediate-trend 50 day average in January, and then topped its longer-term 200 day average in February. If current strength continues, a “golden cross” will take place where the 50 day average moves above the 200 day average – a technical pattern which often ushers in a period of higher prices.

Regardless of how gold performs in the near, intermediate or long term, I’m a proponent of maintaining a small investment allocation to bullion as a hedge during economic uncertainty. We only need look back to the 2007-2009 bear market in US stocks when the S&P 500 fell 56.8% from peak to trough while GLD, on the other hand, surged 23.9%.

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. 

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