India has seen ongoing weakness in its currency as its economy has slowed. This has kept gold near record highs, causing the Love Trade in India to stumble.
All's Well that Ends Well for Gold
The global easing binge from central banks around the world over recent months should have translated to higher commodity prices. This has not occurred. Not only has gold declined, but the price of oil has also decreased considerably, falling from a high of $110 to $78. Jefferies' David Zervos asked, "Shouldn't all this accommodative policy by the Fed, ECB, SNB, BoE and BOJ be sending commodities to the moon?" He believes the answer is straightforward: Lower commodity prices should be a signal to central banks that they are not doing enough. "There is a hefty disinflation trend developing and given the amount of debt in the system--and the weakness of global aggregate demand--any signs of significant disinflation should be cause for grave concern. We cannot mix a lot of debt with a lot of deflation--that will be the end of us!" exclaims Zervos. Zervos is betting that central bankers will choose to stimulate the economy. I agree: As I've said before, when push comes to shove, central banks, especially in Europe, will forgo austerity in favor of the printing presses. In the meantime, hold tight to your convictions, gold investors. Review your allocation to gold and gold stocks to make sure it remains around 5% to 10% of your portfolio. That way the precious metal can act as a shock absorber to help protect from any unexpected bumps in the financial system. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.