Which Is Best: Stocks, Gold, or Bonds?
02/27/2013 9:15 am EST
One market is about to hit a brick wall, but the other two look strong throughout 2013, write Mary Anne and Pamela Aden, of The Aden Forecast.
Based on our technical indicators, it looks like it’s going to be a good year for stocks, precious metals, metals shares, currencies, and commodities.
In particular, the bull market in gold is alive and well. The opposite is true for the US dollar and bonds. These markets look poised to head lower, and the declines could be quite steep.
The S&P 500 is now coming up to its big resistance level at 1,550, which were the 2000 and 2007 tops. If it can rise and stay above this level, it would hit a new record high, signaling extreme bullishness for stocks. We’re watching this closely.
Meanwhile, after many years on the rise, the major trend for bond prices is turning down. This means that despite the Fed’s unprecedented efforts to keep interest rates low, long-term interest rates are headed higher.
That being the case, it’s best to get out of the way. This tells us that US bonds are no longer a safe haven.
The Fed’s monetary policies have been extremely inflationary. Since the 2007-2008 financial crises, the Fed embarked on Quantitative Easing (QE1). This was followed by QE2, Operation Twist, QE3, and a few other programs.
These were all attempts to fight the deflationary pressures, avoid a recession or depression, and keep the economy on track. So far, the Fed has succeeded, but there will be a price to pay, and that price is inflation.
In our view, stocks will be a better investment, and we believe they will strongly outperform bonds in the year ahead. While it’s still too soon to say the bond bubble is bursting, it might be.
That would be confirmed if the 30-year yield rises above 4.1%, and we urge you to watch these markets. Inflation will surely come; it’s just a matter of when.
The fact that gold hasn’t reached a new high doesn’t change our view of the bull market. Gold has given back less than 20% of its 170% rise from the 2008 lows to the September 2011 record high. Gold is simply the best investment against the current historical monetary, fiscal, and economic environment. Think of it as your financial insurance against all of today’s uncertainty.
We recommend buying and holding gold and silver. Among ETFs, we recommend iShares Silver Trust (SLV), SPDR Gold Trust (GLD), and iShares Gold Trust (IAU). Among individual gold and silver shares, we recommend Silver Wheaton (SLW), Royal Gold (RGLD), and Gold Fields (GFI).
Don’t get left behind—finish buying your gold positions. Once gold takes off, the bombed-out gold shares will catch up. They’ve been waiting for the green light from gold. The stock market has already given its green light, so it’s now gold’s turn.