Reuters
reported that the SPDR Gold Trust (GLD), the world’s largest gold-backed
exchange-traded fund, had a “rare” inflow of fresh investment. Holdings increased by 2.10 tons to 792.56
tons, though that figure is still near a five-year low. The multi-month trend of net outflows was
finally broken this week as investors flocked to the traditional safe havens of
Treasury and gold instruments in the wake of a mini-panic in the emerging
markets.
If
nothing else, this demonstrates that the inverse correlation between the
precious metals and stocks is still alive and well. It also shows that investors are still very
open to the flight-to-safety trade whenever equities come under pressure.
Elsewhere Bloomberg points out that banks led by Goldman Sachs
Group and Citigroup are maintaining that commodities are heading for losses in
2014 as rising supplies and slowing demand should exacerbate the bear markets
in gold, copper and other metals. Goldman
pointed out that open interest measuring holdings across the 24 commodities
tracked by the Standard & Poor’s GSCI Spot Index (BUSY) fell for three
straight quarters through December, the longest slump since the global
recession in 2008. The super cycle that
led commodities to almost quadruple since 2001 is reversing, with prices set to
drop 3 percent in 12 months, Goldman said.
The asset class will be a “wallflower” compared with equities, Citigroup
said.
By contrast, JPMorgan Chase says commodity bears are “overly
confident on the reliability of supply” and underestimate demand. All but eight of the 65 commodity indices the
bank tracks will gain over the next two years, with five of them posting
double-digit annual returns, analysts led by Colin Fenton wrote in a Dec. 30
report highlighted by Bloomberg
Businessweek. The “super cycle” is
“just beyond its midpoint,” said JPMorgan, and the markets are still in the
“bull phases.”
This conflict of opinion among major analysts is typical of a
transition phase in the markets and normally coincides with congestion, i.e. a
lateral trading range. Based on the wide
divergence of opinion among investors and analysts alike, an intermediate
period of volatility where neither bulls nor bears gain a prolonged advantage
is a likely outcome.
[Excerpted from the Jan. 30 issue of Gold & Silver Stock Report]
