Gold has been the trade of the decade. Since 2001 gold has not only outperformed the Dow Jones Industrial Average, it has made new all time highs every year from that time. As we all know the Dow Jones Industrial average is below it’s 2007 and 2000 highs making this the so called lost decade for this index.
Gold is a double edge sword in this environment. Many central banks around the world have diluted their nations currencies during the panic of 2008 making gold a true world currency play. Since the March 2009 low in the stock market our own central bank called the Federal Reserve Bank has kept rates at an unprecedented low at zero percent. That means money has continually been created out of thin air. The only reason that gold has pulled back or stalled from moving higher is because the U.S. Dollar has rallied since December 2009. Had the dollar kept declining gold may have been at $1500 an ounce by now. In any case gold is not behaving too poorly considering the dollar has been strong.
Throughout 2010 gold may not be as stellar of a performer as it has been in the past. This is due to investors running into the U.S. Dollar as the European crisis is just heating up. Please don’t think for one minute that this current European crisis ends with Greece. There are another ½ dozen countries and possibly more that are lining up with debt problems.
Gold and silver are also safe havens should a global panic ever occur. Who in their right mind would want to have fiat money in their pockets should a huge crisis ever occur globally. Gold continues to look like a good long term investment, however, it probably should be traded throughout 2010.
There are a couple of ways to play gold. The first way to trade gold is to use the SPDR Gold Shares (NYSE:GLD). This ETF is very liquid and tracks gold very well. Another way to play gold is to trade silver. Silver is much cheaper than gold and usually trades in tandem with gold movements. If traders and investors want to trade silver using and ETF they can trade the IShares Silver Trust (NYSE:SLV).
Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks.com
