Gold Should Continue Secular Bull Trend


"[Gold is] building a base for what we expect will be another leg higher."

Recent gold market action has been constructive. Gold has recently broken out of a short-term down channel and has performed well given the strength in the U.S. dollar we have seen over the past several months. Gold has diverged from the Euro, with which it has had a high positive correlation in recent years. The Euro has recently moved to a new low, while gold has held firm and is trading $75 above its early February low. We recently increased our allocation to the SPDR Gold Trust (GLD) in our model portfolios and managed accounts.

Gold has been consolidating between $1,050 and $1,160 since mid-December, and building a base for what we expect will be another leg higher. Gold's fundamentals remain very strong—massive deficit spending from governments around the world; the longer-term incentive of central banks to keep liquidity generous; zero percent short-term interest rates in the U.S.; and increasing global investment demand for gold as a store of value and a protection against monetary inflation. Since 2000, gold has been in a secular bull market while stocks have been in a secular bear market. There is no reason to conclude that these trends are over.

Exhibit 3

Gold Continuous Contract

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