It was Warren Buffett that urged investors to be greedy when others are fearful, and fearful when others are greedy. At a time when it seems like equities are unstoppable, investors have been pouring into stocks and increasing their overall risk appetite. As a result, safe-haven assets like gold have taken a big hit, as there is less perceived risk in the economy than in the recent past. But what goes up must come down, and savvy investors have an opportunity to turn a profit based on current trends [for more gold news and analysis subscribe to our free newsletter].
The precious commodity has not been performing well as of late; it’s been steadily dropping as markets continue to test uncharted territory. Since October, gold has dipped nearly 10% while the S&P 500 has jumped over 6% during the same time period. This same time period also saw the SPDR Gold Trust (GLD) surrender nearly $5 billion in assets, while the SPDR S&P 500 ETF (SPY) enjoyed net inflows topping $3.1 billion.
Markets have continued their charge higher throughout the first quarter of the year, but many are not convinced that the rally will be long lived. A number of analysts are calling the current stock environment a “Fed Bubble” that will collapse at the first sign of Ben Bernanke pulling the open-ended quantitative easing off the table. Should that ever happen, the rush out of stocks and into gold will be immense. But even if that event is nowhere on the horizon, gold is sitting at an enticing low that investors should keep an eye on [see also 50 Ways To Invest In Gold].
When to Buy Gold
While every analyst and legendary investor has a different entry point laid out for this precious metal, the general consensus seems to be that gold will be a strong buy sometime in the near future. Those looking to get into the commodity would do well to keep an eye on current trends and developments in the market. For example, the recent Cyprus scare sent gold up more than 1%, showing that investors are still willing to flee into their favorite safe haven at the first sign of trouble.
The key for your portfolio will be timing. Those looking to buy in should closely monitor support levels for gold in the next few months. Most importantly, investors should not be afraid to be greedy in a sector that others are fearful of, especially given the recent bull run on Wall Street.
Disclosure: No positions at time of writing.