Wednesday, August 10, 2011

What to Do About Gold?

Having been bullish on gold since 2000 and being a contrarian investor, I am uneasy about the current state of the gold market.


Gold prices have risen for 11 consecutive years, and the price of bullion is up more than 45% over the last twelve months.  Sentiment measures now show a high level of optimism.


Yet, August and September are historically the strongest months of the year for gold.  In addition, gold historically has done well when U.S. Treasury Bill yields were negative, a condition that still exists.  Furthermore, gold remains significantly "underowned," with it representing only a very small portion of the typical individual or institutional portfolio
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Given these considerations, it seems likely that a correction will ensure.  I now recommend not buying gold at current levels (unless one has none at all and makes a purchase of only a few percent of assets).  Though I think the long-term bull market in gold is intact given the state of the world's finances and the behavior of central bankers, I would wait for a pullback in price before making significant purchases.


Steve Lehman
LehmanInvest.blogspot.com/


Gold:  1760

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