You’ve probably seen or heard the commercials. Now is the time to buy the only safe investment asset: gold.
Gold crossed the $1,800 an ounce mark in September, and it seemed like $2,000 was a fait accompli. The gold bugs were out in force. So far, though, that fait accompli looks more like a plain-old head fake. Gold prices have been trapped in a narrowing channel on the charts, currently around $1,668/ounce. That could point to a breakout one way or the other (more on that in a second).
“I think it deserves a place in most investors’ portfolios,” said Kevin Mahn, chief investment office of New Jersey-based asset manager Hennion & Walsh, this morning on the Markets Hub. While the yellow metal once may have been viewed as an inflation hedge, now it’s a “volatility dampener,” he said, given that the safest of the save-haven plays, Treasury, have turned into “return-free risk.”https://americangoldmetals.com/news/wp-admin/post-new.php
As markets get choppier, as the next round of the debt-ceiling debate heats up and the sequestration gets closer, investors will return to real assets, and gold is one of those, Mahn said. If Congress can’t get together and get the budget under control, you could see ratings agencies downgrade the U.S. again. That could benefit gold as well, he said.
Mahn isn’t a gold bug, and he’s aware of the speculative fervor that follows gold. ”It’s almost as though every time you turn on the TV and see the commercial touting gold, that’s a reason to be fearful.” Still, the firm sees the value in it apart from that, and advises its clients to have about a 5% allocation in precious metals.
As for gold prices, BofA/Merrill’s technical strategist MacNeil Curry thinks the price could bottom out somewhere in the $1,654-$1,625 range. From a charts perspective, Curry thinks a move above $1,695 would signal a breakout, and a possible move back toward $1,800. A close under $1,625 would signal a technical breakdown.