Dollar Ben Bernanke was very good for gold yesterday

03/27/2012 3:39 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Stocks liked Fed chairman Ben Bernanke’s speech yesterday that emphasized the Federal Reserve’s doubts about the strength of the recovery in the job market. But the gold market liked it even more. The SPDR Gold Shares climbed to $164.40 yesterday from $161.53 on Friday, March 23. That was a 1.8% gain for the gold bullion ETF.

Bernanke chose a glass-half-empty approach to recent job gains in his speech to the National Association of Business Economists. The rapid drop in the unemployment rate in the last six months to 8.3% from 9.1%, he said, may reflect a one-time bounce reversing the job cuts of 2008 and 2009. “To the extent that this reversal has been completed,” Bernanke said, “further significant improvements in the unemployment rate will probably require a more rapid expansion from consumers and businesses, a process that can be supported by continued accommodative policies.”

In other words the Fed isn’t even vaguely thinking of rescinding its promise to keep interest rates at current extraordinarily low levels through the end of 2014. And the possibility of another round of quantitative easing remains on the table.

The stock market, accurately, heard the sounds of printing presses churning out dollar bills in Bernanke’s remarks. Stocks rallied because increases in the money supply support faster economic growth (in the short-run anyway and who worries about the long-run on Wall Street right now?) and because lower interest rates make stocks look even better against bonds. (The S&P 500 stocks currently yield 1.86%. That’s more than the 1.02% yield on the 5-year Treasury note and not far behind the 2.18% yield on the 10-year Treasury.)

So too did the gold market where the sound of printing presses argues for a falling dollar (good for gold) and an eventual increase in inflation (good for gold).

Right now it looks like the SPDR Gold Shares ended their 10% or so correction from their February 28 intraday high at $174 to a bottom at $158 and have, with yesterday’s move broken through resistance to start a new rally.

Potentially anyway. The 200-day moving average for SPDR Gold Shares is at $163.74 and the 50-day moving average is at $165.86. A move above those levels--that stuck--would add to my belief that gold is ready to move up from here for a while.

If you want to buy gold itself SPDR Gold Shares is a good pick. If you want to buy shares of gold mining companies, try Jubak’s Picks Goldcorp (GG) or Yamana Gold (AUY). One other interesting pick is Randgold Resources (GOLD), which has pulled back strongly on the coup in Mali where the company conducts mining activity.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Goldcorp and Yamana Gold as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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