THE OTHER SIDE

There's a lot of negativity about commodities in general and gold in particular going into 2016 with many strategists predicting equities are the place to be. And well they might. One of the MSM themes about gold, however, is how poorly its been doing. But that, like many things, is relative.

It's not our point here to push gold. We own the stuff and we will continue to own it. We also own silver, a metal that in many ways has been more debauched than gold. We're just bringing you the other side.

• Some big names still have big holdings in gold. The Moltly Fool points out that John Paulson and his hedge fund group Paulson & Co. own about $900 million worth of shares of the SPDR Gold Trust. Another investor showing confidence in gold is Ray Dalio, founder of Bridgewater Associates, who has said, “If you don’t own gold, you know neither history nor economics.” Paulson and Dalio seem to be demonstrating gold’s use as a hedge against uncertainty in fragile markets.
•  Gold has been falling hard since 2013, being pulled down right alongside the rest of the commodities complex. However, as John Rubino points out in a Seeking Alpha article, this is only in U.S. dollar terms. As seen in the chart below, gold is behaving just fine in Canadian dollar terms, up 7 percent over the past year and which helped offset the negative returns of Canadian stock market which fell 11 percent. Rubino writes, “Protection from currency trouble is why people own it (gold), and why in the vast majority of places its owners are very happy.”

 
 The same holds true for many other weak domestic currencies. Gold priced in Brazilian real surged 31 percent while the Brazil’s top 100 stocks lost 10 percent as shown in the chart below. While the U.S. dollar strengthened with the much-hyped Fed hike in interest rates, history shows that the dollar typically does not get stronger after the first rate hike, so for U.S. investors, now could be an opportune time to rebalance your portfolio of assets.

• Gold bears are claiming that the major banks haven’t been buying gold. Zero Hedge reports that Goldman Sachs expects the price of gold to fall to $1,000 per ounce, while others, including BNP Paribas and ABN Amro expect gold to fall even lower. Zero Hedge points out that when popular sentiment has shifted away from gold.
• According to a Bloomberg report, the U.S. dollar is headed for its biggest monthly loss since August (against the yen) and since April (versus the euro) following the Federal Reserve’s decision to hike interest rates for the first time since 2006. At the same time, the Surprise Index which is a Citigroup measurement of how U.S. economic indicators compare with forecasts, heads for a second monthly decline.
• A group of 10 Wall Street strategists announced their forecasts for 2016, as published on Zero Hedge this week. Five strategists say to avoid materials, four strategists warn against energy, while nearly all were bullish on financials and technology. The forecasts, originally sourced in Barron’s, were brought to light during a Bloomberg TV interview with Marc Faber earlier in the week. Faber stated that the U.S. is headed into recession and rather than be bullish on U.S. equities (as a majority of the strategists were), to instead “be realistic.” 

 advisorperspectives.com/commentaries/20151231-u-s-global-investors-hope-for-the-new-year-3-asset-classes-for-2016