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.

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