The recent volatile action in the gold market may be spooking some investors, but MoneyShow's Jim Jubak shares his calming advice for gold holders.
Gold’s going nowhere fast, but fast it is. Gold went up $20 an ounce on February 26, for example. On February 27, gold went down $20 an ounce. Net for the two days was nothing, but sure a lot of volatility. So what’s going on?
Well, what’s going on is there is no real trend in gold. Therefore, it’s not attracting a whole lot of money at the moment, except for people who want to play at sort of inside the day, as it were.
It you’re looking for longer-term trends, and you’re a speculative trader, you’ve got a lot more attractive stuff to look at. You’ve got the yen, which I think is pretty much in a downtrend, although there's a lot of volatility. You’ve got the pound, which is pretty much in a downtrend...again a lot of volatility. Why not play those instead? So if you’re a speculator, those are easier.
What you’ve got really here is no clear trend on gold to the upside. You’ve got some technicals that say gold has still got to fall further. You may have some fundamental buying, but not enough to really change things around.
Therefore, gold is kind of trendless—a lot of volatility because there is a lot of fear in the market; a lot of people saying, "Maybe I’ll hedge, maybe I won’t hedge." And the volatility on a day-to-day basis means that you’ve got a lot of money coming in and out of gold, trying to make money on a very short-term trade. A lot of volatility in gold, but no real trend.
If there is a trend, it’s probably drifting down for a while. That’s not a recipe to bring money into gold as an asset class. So I think you can look at this and say OK, if I want to buy gold for the future, for a return of inflation or a currency hedge, I can probably wait for a while.
I think that’s what people are doing. If you want to play it short-term, you’re basically a swing trader trying to get gold, buy it on a down day, sell it on an up day. And there ought to be enough volatility to play that. But this isn’t a market that’s really going to attract most of us at this moment.
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