Gold’s mojo has vanished.
And if stocks have any say in the matter, it isn’t coming back anytime soon.
I love my charts. But I don’t need a picture to show you what’s going on here…
By now, you know the trends. In the 1990s, gold was stagnant while stocks enjoyed an extended bull run. As stocks started to fall out of favor in the early 2000s, gold’s massive rally began.
Right now, another shift is brewing. The tide is turning in favor of equities.
After more than a decade of panic and despair, stocks are attracting the attention (and dollars) of the investor class. More than $34 billion rushed into stocks in January, according to Lipper, the most in more than 15 years. This is just a drop in the bucket. Investors have much more tied up in bonds and cash. They will look to put this money to work soon.
It’s impossible to argue against these powerful market cycles. You can point to the Fed and the sinking dollar. Yet neither of these forces can offer gold the momentum boost it experienced on its run from $300 to more than $1,900 at its most recent peak. During the past decade of crisis, gold was the best performing asset on the planet. Its days as a leader are now numbered…
Famed technician John Murphy explained in a weekend blog post that “…stocks should become the most favored asset class in the years ahead… Treasuries will probably be the biggest losers. Gold may benefit from a falling dollar to some extent, but probably won’t do nearly as well as it did over the last decade because of rising stock values.”
Now, before you come after me with a pitchfork, you should know that gold is not heading for a nasty collapse. It will hold its ground. And it will continue to wander through intermediate highs and lows.
However, speculators who have played gold and helped push it higher in recent years won’t be around anymore. If you buy gold now, treat it as a safe haven. If you jump into a gold position this year expecting explosive gains, you’ll find nothing but disappointment…
for The Daily Reckoning
Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.
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