Gold stocks loose their luster

The last two days of panic selling in the financial markets around the globe brought gold stocks back to their trading range diminishing hopes for gold-related equity investments to serve as safe havens in the highly turbulent markets. A fresh breakout from the trading range will be needed to reassert gold investments as market leaders.

The data tells us that in the current market environment gold stocks no longer provide a hedge against losses in the stock market. Furthermore, the extent of the drop (see chart below) tells us that gold stocks are extremely risky investments right now. A risky investment that does not serve as a hedge against market downturns do not sound like a good deal for us.

Fidelity Select Gold fund (FSAGX, down -6.99%) regressed to its mean after a false breakout.

The Fidelity Select Gold fund (FSAGX, down -6.99% today) regressed back to its mean after a false breakout.

Mutual fund screens are provided by FidelitySignal.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s