Gold Appreciation Outshines Wall Street

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Gold has benefited from diversification flows out of the more traditional asset classes, such as stocks. This is a trend that is likely to continue and keep equities under pressure. Gold mining stocks, which finished in the number three slot on our survey, should remain an exception. Look for gold mining stocks to continue outperforming other sectors and the broader market indexes.

Gold continues to shine as one of the best performing asset classes through the first half of 2008, according to the USAGOLD Annual Survey of Investments. Only the CRB index, which of course includes a gold component, outperformed gold itself over the past year. Arguably it was the latest surge in oil prices that allowed the broad measure of commodities to supplant gold from the number one position over the last month of the second quarter.

As encouraging as this is to the gold owner, it is extremely troubling for most households. The two biggest losers are the asset classes where the vast majority of the net worth of most individuals is wrapped up, equities (stocks, mutual funds, 401ks, etc) and the family home.

As the month of June came to an end, the DJIA had lost just over 15% from the same period last year and has retreated more than 20% from the all-time high, on the verge of confirming a bear market. With the U.S. economy limping along on the cusp of recession, the stock market remains vulnerable to a protracted bear market.

Gold has benefited from diversification flows out of the more traditional asset classes, such as stocks. This is a trend that is likely to continue and keep equities under pressure. Gold mining stocks, which finished in the number three slot on our survey, should remain an exception. Look for gold mining stocks to continue outperforming other sectors and the broader market indexes.

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