The outperformance of gold, silver, and U.S. treasury bonds, so far in 2016, seem to indicate that investors are finally acting more prudently than hopeful. It’s a good thing too, because the QE3 driven stock market rally has pretty well exhausted its bull run, another “too big to fail” bank is in desperate derivative danger (again), and the upcoming Brexit vote in Britain could turn the entire global economy on its ear. It’s hard to say which domino will be the first to fall, but there are so many to choose from, it almost doesn’t matter which is the first, because once the fall down parade begins, there is little if anything to stop it.
Well-diversified investors enjoy the few times that stocks, bonds and gold manage to rally together. Unfortunately, it’s a non-sustainable scenario. Financial gurus have been sharing concerns for a while now that increased interest rates will be bad for gold, but history simply doesn’t agree with that statement. The fact of the matter is that gold performs well during easing periods, but even better during tightening. The gurus were upset last December when the Fed elected to raise interest rates, but the fact remains that gold is up 15% since then and the Dollar, which tightening is meant to bolster is down 5% over the same span of time. The stock market is up less than 3% over the same span. Economic gurus should leave gambling to Vegas professionals. Gold offers the best insurance in times of uncertainty and times can’t get any more uncertain than they are today.