Why buying gold now could be a lot like buying stocks in 2009

If the momentum that helped propel the S&P to its best two-week stretch in a year is to continue, it’ll depend largely on a flood of economic numbers culminating with the jobs report at the end of the week.

It’ll also hinge on investors’ ability to rethink the nasty start to the week in China. Watch the China chatter grow after the central bank cut the reserve-ratio requirement for banks well after Shanghai closed. That’s helped U.S. stock futures pare losses. The mood seems nowhere near as ugly in the U.S. as it was in China, where the Shanghai Composite, the worst- performing of 93 equity indexes around the world this year, got hammered.

“It was a red carpet across all major indices over in Asia and a similar market action is expected over in Europe,” said AvaTrade’s Naeem Aslam. “If the U.S. economic data does start to print more stout readings, just like the last week, then the odds of a further rate hike will not be that far out of sight and this will only inflate the market volatility further.”

Gold bugs like what they’re seeing so far. And they’ll really like it if the economic clouds darken a bit as the numbers roll in over the next few days. The precious metal, of course, has been crushing it this year and our call of the day expects more of the same
Key market gauges

Futures on the Dow YMH6, -0.66% and the S&P ESH6, -0.75% are having a bumpy start, even with that China move. Gold GCH6, +1.74% the best-performing major asset so far this year, is understandably catching a lift. Crude oil CLZ6, +2.91% is barely moving.

Asia ADOW, -0.01% was mostly in the red, and the Shanghai Composite SHCOMP, -2.86% SHCOMP, -2.86% closed off 2.9%, as investors expressed disappointment that there wasn’t much in the way of growth-boosting measures coming out of the G-20 meeting. Europe SXXP, +0.72% is down, and the dollar DXY, -0.01% is getting mauled by the yen.

The call

Speaking of gold’s banner year. Gavekal Capital is confident the rally is just getting started. “Buying gold today may be comparable to buying stocks in April 2009,” the blogger wrote. And we all know how that went.

He gives six reasons for why he believes gold needs to be in your portfolio right now. Here they are:
•. Technical trading patterns suggest gold may finally be breaking out into a bull market.
•. Gold remains out of favor despite the recent rally.
•. The Federal Reserve’s ability to raise interest rates is constrained.
•. The overpriced U.S. dollar has limited room to run.
•. Real interest rates are heading lower around the world as central banks get creative.
•. Physical gold may be difficult to acquire in the coming years.

Shawn
Langlois
Feb 29, 2016