27-Oct (USAGOLD) — Gold remains well contained within the recent range, awaiting some impetus to breakout. Durable goods orders disappointed this morning, while initial jobless claims edged lower.
Despite the durable goods missed, the Atlanta Fed’s GDPNow model for Q3 edged higher to 2.1%, from 2.0% previously. The model anticipates a stronger net exports contribution on Q3. But again, look where the model started; above 3.5%! Even the blue chip consensus has been trending lower since early September.
We get the first official look at Q3 growth tomorrow morning. Median expectations remain at 2.5%, but I suspect there is a greater chance for a miss than a beat. If the advance GDP print is below 2.0%, we could see the long awaited breakout in the gold market as rate hike expectations get unwound.
If the Fed remains on hold, it could breath new life into the stagnant stock market. Even so, I think the Research Affiliates report that says investors should start getting used to disappointment will hold true.
“[T]he ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return.” — Research Affiliates
An article in USAToday this morning reminds us that the last milestone in the stock market was DJIA 18,000, which was nearly 2-years ago! If the odds of a 5% return are zero, imagine how far off the mark many pension plans are when they’re still factoring in 7%+ returns.
This amounts to an increasingly dire situation for retirees and those nearing retirement age. And that dire situation extends to the broader economy as the massive surge of baby boomers reach retirement with less money than everyone expected. This will force them to live more prudently; to save more and spend less both before they retire and after, regardless of low yields. That does not bode well for an economy driven primarily by consumption.
It is widely acknowledged that including gold in one’s portfolio can improve overall performance:
“Gold can help investors manage portfolio risk. The key is the way that gold interacts with other assets. Two factors are particularly important: Low correlation with equities…gold has low correlations–lower than that of assets that are often seen as ‘diversifiers’–to stocks over long periods of time. Outperformance during crises. Gold tends to outperform other assets in periods of economic and financial turmoil. This gives investors a way to reduce risk when it is most needed.” — WGC
Now that we’re nearly a third of the way through the fourth quarter, this may be an opportune time to think about rebalancing your portfolio. Do you have any gold? If you have gold, do you have enough?