In 2012, gold endured a bull run that was unlike any that commodity investors had ever seen. The precious metal managed to notch 12 straight annual gains through 2012. That meant that until 2012 had expired, the ultra-popular SPDR Gold Trust (GLD) had never seen a negative annual performance. That quickly came to a head in 2013, as gold sank more than 30%, finally enduring a correction that seemed long overdue [for more commodity news and analysis subscribe to our free newsletter].
Gold Struggles to Find Its Rhythm
Many thought that gold’s nasty drop in 2013 was a call for an entry point, and while they may be right in the long-term, the precious metal has yet to flash any definite signs of resuming its bullish momentum. The yellow commodity has struggled to find a meaningful direction over the past year and half, though it has managed to gain just under 7% in 2014. This is compared to gains of just under 10% for broad markets, with the S&P 500 setting all-time high records on a regular basis.
Though gold is not far behind markets this year, the bull run on equities has undoubtedly revealed an achilles heel for the commodity. As investors eye juicy returns in equity markets, many have begun to move their money out of gold and into more risky assets. Since the beginning of 2013, GLD has seen net outflows of more than $25 billion, a sizable amount considering the fund now has just over $32 billion in total assets [see also The Top 100 Gold Investing Blogs].
The Fed in Focus
Most gold bugs have had their eyes and ears glued to the Fed to see if any new policies will help kick gold in the right direction; it was the massive quantitative easing programs that helped gold make some handsome gains, after all. But patience has proven itself to be a virtue, as the Fed has yet to give a strict timeline of raising rates; a sign that inflation may begin to tick up, which typically increases interest (and demand) for gold.
For those investors who believe that gold will eventually resume an upward momentum, the metal is sitting at an arguably attractive entry point, especially if equities lose steam. From a long-term perspective, gold could certainly be considered a buy. The other side of the equation, however, points to a Fed willing to do just about anything to keep the economy moving forward and stock markets at all-time high levels. The waiting game may continue to infect your gold investments, but it seems more than plausible that the metal will eventually see strong performances – the question of when, unfortunately, is one that is impossible to answer.
Disclosure: No positions at time of writing.