Gold and Precious Metals
The momentum in gold and other precious metals might wane a bit in 2011, as investor appetite for risk assets picks up as the global economy recovers.
"The much stronger performance of other commodity sectors relative to precious metals over recent months, despite what is arguably an even more severe debt situation for sovereign debt risk, reflects a big change in market psychology," notes Kevin Norrish of Barclays. "With economic growth once again surprising on the upside, the re-emergence of sovereign debt concerns has much less of an effect on energy or industrial metals markets than earlier this year."
Still, analysts maintain a positive outlook for gold as the Fed continues its easy money policy and sovereign debt problems in Europe remain in focus.Adrian Day, who runs an asset management company bearing his name, says gold should remain a defensive holding in investors' portfolios. "Currencies are losing purchasing power. People are buying gold because they do not trust paper money. They are buying it as a defensive measure, regardless of price," says Day. Investors are also likely to continue buying gold even as the economy recovers as a hedge against inflation. "If there is a recovery in U.S. and E.U., I don't see how that can happen without being accompanied by inflation. So copper and oil will do well, but so will gold."
Renowned commodity investor Jim Rogers who has said gold can rise as high as $2,000 an ounce and silver can still rise to $50 told TheStreet that he continues to hold both the metals, though he is not buying just now. Other precious metals might be more volatile. Silver's sparkling rally in 2010 took everyone by surprise. But experts are uncertain whether the rally will continue in 2011. "Silver is even more dependent on investor interest [than gold], as mine supply continues to hit record highs and shows no sign of slowing; hence we are less positive on silver relative to gold," according to Barclays Capital's Norrish. How to Trade: Analysts advise those who are underinvested in gold to continue buying it on dips. The SPDR Gold (GLD) and the iShares Gold Trust (IAU) are two physically backed gold ETFs that are popular investment vehicles. IAU has a lower expense ratio and recently found place in the portfolio of George Soros.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV