Despite a pullback from its all-time high of about $1,920 an ounce set in September, gold is still trading in the $1,750 range. In fact, the glittering metal has gained 22% in the past 12 months. What's more is that I believe gold prices will eclipse $2,200 an ounce next year, and shoot beyond even $5,000 an ounce after that. So there's obviously still time to get in on this once-in-a-lifetime bull-run, if you haven't already. Of course, every investor should at least have shares of a gold-based exchange-traded fund, but if you really want to profit from the price surge, you ought to look at gold mining companies. Let me explain.
So much for engineered stock market "rallies" and global "bailouts" - per the latest ICI update, we can now confirm that no matter how or what the market does, retail investors have firmly decided that the ridiculous market volatility is simply too much for most, and have withdrawn another $3.7 billion from domestic equity funds, and have now taken out money for 14 straight weeks ($44 billion) since the US debt downgrade (but, but, the S&P barely lower), or 31 weeks ($130 billion) if one ignores the statistically irrelevant blip of a $715mm inflow on August 17. Perhaps instead of trying to fabricate a makeshift price for the SPX which nobody believes any more, the Fed should focus on moderating the insane volatility which is the primary reason preventing any normal investors from putting cash into stocks. And yes, $6.2 billion went into bonds, despite the record low yields. Said otherwise, retail investors have withdrawn $214 billion from domestic equity mutual funds since the beginning of 2010. Put a fork in stocks: America's infatuation with the stock market is officially over.
World markets got a nice tailwind yesterday (Wednesday) on news that the U.S. Federal Reserve is stepping into the fray along with other central banks to boost liquidity and support the global economy. Of course it's nice to see stocks get a hefty boost, but to be honest I'd rather see them rising on real news. Not that this isn't a good development in terms of stock values - but come on, guys. When things are so bad that the Fed has to step into global markets and bail out the other bankers in the world who can't wipe their own noses, we have serious problems. Think about it. The Fed is going to collaborate with the European Central Bank (ECB), the Bank of England (BOE), the Bank of Japan, the Swiss National Bank and the Bank of Canada (BOC) to lower interest rates on dollar liquidity swaps to make it cheaper for banks around the world to trade in dollars as a means of providing liquidity in their markets. Put another way, now our government is directly involved in saving somebody else's bacon at a time when, arguably, we don't have our own house in order. The Fed is cutting the amount that it charges for international access to dollars effectively in half from 100 basis points to 50 basis points over a basic rate. The central bank says the move is designed to "ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credits to households and businesses and so help foster economic activity." Who writes this stuff? Businesses are flush with more cash than they've had in years. The banks are, too. But the problem is still putting that cash in motion -- just as it has been since this crisis began.
