This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

What Are Reasonable Gold Market Expectations?

By Jeff Clark, Senior Precious Metals Analyst

NEW YORK ( Casey Research) -- The historical record shows that those who get washed out during big corrections miss the greatest buying opportunities of a bull market.

With that as context, what can we expect from gold moving forward? Let's start with the short term.

Full market capitulation is underway. Headlines about gold are almost universally negative today, and all about selling. This feeds on itself, and the process may not be over. In this kind of environment, prices will overshoot to the downside. In other words, the bottom may not be in.

What if we get more short-term pain?

Differentiate between short-term sentiment and long-term reality. It's not deleveraging and fear that has hit our sector as it did in 2008, but renewed confidence in the broader markets and lack of higher inflation rates that many expected by now. The current thinking by sellers is that crisis has been averted and therefore there's no need to own gold.

Contrast the selling by these short-sighted investors against record levels of buying by central banks, China and India gobbling up 20% of global annual production and runaway demand at mints.

Fundamentals dictate long-term trends -- and fundamentals don't lie. The longer our fiscal problems are allowed to fester, the greater the eventual structural damage to global economies and standards of living. These forces will sooner or later come to a head, and will play out for several years.

The broader investment community does not yet see a compelling reason to invest in gold -- but when inflation starts pinching pocketbooks and budgets, a sea change will take place. Remember, roughly 98% of U.S. investors don't own gold -- that will change when higher rates of price inflation begin making headlines.

Should gold end the year down, it will not mean the bull market is over. It will mean that inflation remains contained and that we have a longer-than-expected buying opportunity. My suspicion is that it will also mean the turnaround will be stronger and longer than we've seen before.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
SLV $15.93 -0.31%
GLD $113.66 -0.08%
AAPL $124.43 -1.54%
FB $82.22 -1.18%
GOOG $548.00 -0.73%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs