Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Gold Looks Good to Me in 2014

Commodities / Gold and Silver 2014 Jan 29, 2014 - 12:50 PM GMT

By: DailyGainsLetter

Commodities

Sasha Cekerevac writes: Just the other day, I was talking to a friend of mine who seemed extremely cheerful. I asked why, and he said that his investments have performed well over the past few months and he saw no reasons to worry.

This is a common problem with investor sentiment; people tend to become complacent and only look to the recent past as an indication of what tomorrow will bring.


This is quite dangerous. Investor sentiment is often wrong and can be used as a contrary indicator, buying when others are dumping their stocks and taking profits when others are blissfully unaware of the changing landscape around them.

Americans need to be careful of becoming too complacent in their bullish investor sentiment, because the U.S. is not isolated from the rest of the world.

When the real estate bust and financial crash occurred here in America several years ago, the effects spread to many nations around the world, including the emerging markets.

With the Federal Reserve pushing the gas pedal on money printing here in the U.S., it has created a shock absorber to some extent, temporarily keeping global pressures at bay, especially in relation to the emerging markets.

However, investors do need to be aware that there is much uncertainty around the world. Investor sentiment for global institutions has been aware of these potential issues and is now running for the exits.

Last week this began in Asia, as economic growth appears to be slowing and reports of a financial crisis in China are beginning to grow. With the Chinese shadow-banking sector showing signs of cracking, this is creating negative investor sentiment among other emerging markets.

Turkey has been one of the hardest-hit emerging markets, as investor sentiment is fleeing that nation on the heels of one of the biggest corruption scandals in recent times. The Turkish currency has continued to plummet, with the central bank holding emergency meetings to try and stem the flow of negative investor sentiment.

Argentina is a complete mess. The country’s currency has dropped by much more than 20% in just a couple of days. Inflation is beginning to run rampant—up more than 25% in 2013—and is possibly set to rise even further as the currency continues to drop.

With more riots occurring in many emerging markets, investor sentiment has begun moving into safe havens, such as gold bullion.

I know what you are thinking: “These are factors affecting the emerging markets, and not the U.S.” I wouldn’t be so quick to make that assertion. You have to remember that never before has the world been as interlinked as it is today.

For better or worse, the U.S. depends on the rest the world for growth. After all, looking at the latest data from retailers, it’s clear that U.S. consumers are not ramping up their spending.

If the U.S. consumer is pulling back on spending and the emerging markets are having issues, this can’t be a good combination for investor sentiment in America, especially if the Federal Reserve continues reducing its monetary stimulus.


Chart courtesy of www.StockCharts.com

The above chart shows the massive divergence between investor sentiment in America, represented by the SPDR S&P 500 (NYSEArca/SPY) exchange-traded fund (ETF), and the emerging markets, represented by the iShares MSCI Emerging Markets (NYSEArca/EEM) ETF.

I believe that the Federal Reserve has pushed investor sentiment higher over the past year, primarily due to monetary stimulus, which is why there is such a divergence between our markets and the emerging markets.

The question you have to ask yourself is: Can investor sentiment continue pushing our stock market higher even though the emerging markets are showing signs of cracking, the Federal Reserve is beginning to pull back on money printing, and corporations are having trouble increasing revenue and are reporting a decelerating rate of earnings growth? I don’t think so.

Part of the diversification for emerging markets investors is to allocate funds into safe haven assets, such as gold bullion. As international investor sentiment remains weak amid uncertainty throughout the world, I think we could see continued strength in gold in 2014.

This article Why Gold Looks Good to Me in 2014 was originally published at Daily Gains Letter

© 2014 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in