Gold (Ticker: GLD) ETF Five-Year Price Chart Above (click to enlarge)
Gold prices finally moved higher today after falling steadily over the past week. This is despite the continued global economic uncertainty, banking crisis in Europe and the threat of nuclear war with North Korea. All issues which should support gold prices and encourage money flow into the apparent “safe haven” asset.
A glance of the five year chart above clearly shows gold prices trading sideways since October 2011. Now prices are testing a critical support level at the $150 per share price (equivalent to $1500/oz USD).
Although gold successfully bounced off the support level today on the heels of disappointing U.S. employment data, we will be watching gold price action and sentiment closely next week.
Our President, Suhail Ahmad shared an interesting note on his blog earlier this week from Marc Faber author of the Gloom Boom & Doom newsletter speaking on Bloomberg television.
Key point from Faber was that gold is no longer holding up as a “safe haven” for investors. Blame it on the new virtual currency Bitcoin or unwinding of positions by hedge fund gurus such as George Soro’s but reliance on gold as safe haven may be diminishing:
“When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker. I just mentioned that it doesn’t flow evenly into the system.
Now from time to time it will lift the NASDAQ like between 1997 and March 2000. Then it lifted home prices in the U.S. until 2007. Then it lifted the commodity prices in 2008 until July 2008 when the global economy was already in recession. More recently it has lifted selected emerging economies, stock markets in Indonesia, Philippines, Thailand, up four times from 2009 lows and now the U.S.
So we are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide. Even in gold, it will be difficult to hide.”
SiAlpha system has signaled a NEGATIVE rating on gold in the immediate and short-term but currently remains positive in the medium-term.
Disclosure: SiAlpha multi-strategy portfolio has a hedged net long position in Gold.