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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Time to Buy the Hated Gold?

NEW YORK (TheStreet) -- Gold, gold miners and, really, anything to do with precious metals had a terrible year in 2013. The evidence is obvious in the 27% decline in the SPDR Gold Trust  (GLD) and the 53% drop in the Market Vectors Gold Miners ETF (GDX).

After years of poor performance, gold started to rally early in the last decade. First it was an under-owned, oversold asset. Then it became more accessible thanks to exchange traded products like GLD. Gold continued to rally as fear mounted that the Fed's zero percent interest rate policy and asset purchases would debase the U.S. dollar and cause price inflation. After 12 years in a row of gains, gold finally had a big drop last year.

Regardless of expectations of how markets are supposed to work, the government reported that inflation has not skyrocketed. If anything, deflation is a bigger near-term threat, and the U.S. dollar came nowhere close to meeting the worst debasement fears. The PowerShares DB US Dollar Bullish ETF (UUP) was down 1.1% last year and 3.9% for the last two years.

Gold's prospects don't look good going into the New Year, either. Price inflation has only appeared in the cost of food, health care and education. While those are real expenses for everyone, headline CPI will just continue to limp along below 2%. If and when CPI begins to go up, whether because of Fed policy or anything else, then this would be a positive catalyst for gold.

Earlier this week Barron's cited a more fundamental headwind for the miners. They may need to write down the value of assets related to the business of mining gold. That would include any inventory of the metal they may have, the value of the mines they own and the expected value of the gold they hope to pull out of the ground.

As gold has gone down, investors have been selling out of their gold positions. Gold ETFs have sold down their holdings by 33% to 1764 metric tons to meet fund holder redemptions.

One gold bull for 2014 is David Lutz from Stifel Nicolaus. In an interview at Yahoo! Finance, he cited Chinese investment demand as a factor. The gold ETFs listed on the Shanghai exchange last summer would serve as a positive catalyst, he said.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 17,122.01 +15.31 0.09%
S&P 500 2,000.12 +0.10 0.00%
NASDAQ 4,569.6210 -1.0160 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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