Gold
Positive Cross!
50 day breaks above 200 day
Moving Average!
Wall Street firm says there is now a 'strong case' for gold over bonds, stocks
- Bernstein is tracking two key measures, both of which are at levels not seen since World War II: global government debt and central bank buying of gold.
- The firm argues that the current geopolitical environment is heading toward a period in which neither stocks nor bonds will work.
- "We show that from current equity valuations and from similar points in previous cycles gold and equities give more similar returns ... [to] risk assets such as equities," Bernstein said.
"A material shift in geopolitical risk and a near-record build up in government debt make other potential risk-free assets more questionable and also bring a temptation to create inflation, thereby further enhancing the case for gold," the note added.
"The problem with holding gold is that the long run real return is zero. However, it is also apparent ... that there are periods when the other traditional source of 'risk free' returns, in the form of Treasury bills, fail to deliver risk-free returns," Bernstein said. "These tend to be in periods of geopolitical uncertainty or after large build-up of debt."
DYI: The
way to understand gold and its returns is this:
Over very long periods of time – from 1913 formation of the Federal
Reserve – if you purchased gold then and held to today your return would be
equal to that of T-Bills reinvested. Or
simply put it would equal the rate of inflation.
Gold is money.
The best comparison is purchasing 1 ounce of
gold back in 1913 at $20.67 and having that same amount in U.S. currency held
to today which would you rather have?
Obviously, gold. Gold is trading
at $1316 with the same purchasing power of goods or services as $20.67 back in
1913. It is money that holds it value
over long periods of time. Much shorter
time periods there can and has been wild swings in price.
Dow/Gold Ratio as of 1/12/19 is 19.3 to 1.
The shorter term swings that can be used
within our lifetime of investing by following the Dow to Gold Ratio [see chart
above]. Today it is 19.3 to 1 around the
midpoint range or fair value. Gold could
break out or simply be a head fake with the price falling back with the 50 day
average breaking below the 200 day for a negative cross. Which direction?? Who knows?
It is a possibility with DYI holding 32% of our model portfolio we are
ready to increase or decrease all based upon our averaging formula as valuations
change.
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