Fri 1/27/12 4:14 PM – Gold Gets Back on Track

Since 2000 gold has moved higher almost regardless of what stocks did. Last summer that changed as investors and traders sold gold in order to meet margin calls on stocks and so gold moved in the same direction as stocks since July.

Now it seems gold has gone back to its old ways. While stocks were flat this week, gold was up 3%. This was due to the announcement by the US Federal Reserve that its members expected they would keep rates low into 2014, a year longer than they had said previously. They also said that another round of quantitative easing (QE III) would be in the cards if growth stalled. The weak GDP number anounced yesterday (not weak on the headline but weak in the details) gave credence to that possibility.

I bought back our gold this week because I think it is back on track, not only for speculators, for those bearish on the world outlook but also for those afraid of inflation should the US flood the world with dollars again in a QE III. While you may not have seen much inflation aside from the gas pump and groceries, inflation did kick up quite a bit overseas, especially in Asia and Latin America.

This week stocks were flat, bonds gained 1.5%, gold was up 4% and oil was up a little more than 1%. In short, everything but stocks had a great week and our accounts reflect the gains, especially in bonds and gold.