Drop In Gold Futures May Indicate Gold Run Is Losing Momentum

Monday, February 18, 2013 08:00
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Drop In Gold Futures May Indicate Gold Run Is Losing Momentum

Tags: investing for income | markets | rebalancing

Gold futures declined last quarter by more than any other drop in the past eight years.

Soros Fund Management LLC cut its exposure to the SPDR Gold Trust by 55%.
 
Bacon’s Moore Capital Management sold its entire position in the SPDR fund. It also cut its holdings in Sprott Physical Gold Trust.

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Gold for April delivery fell as much as .6% to $1625 per ounce on the Comex. This is the lowest price since August 21, 2012.
 
It may be a signal that the gold run is over. In looking at the gold, bond, and other markets that have had huge run-ups, it’s important to remember that all markets cycle.
 
Contrarian indicators can be very useful in determining just how rich a market has become. It’s also good to remember that leaving a little profit on the table is much better than wishing you had.
 

 

If clients are reluctant to sell bonds because of the difficulty in finding yield, they may wish to establish a scheduled rebalancing program that siphons off profits as markets become overbought.

 

Instead of reinvesting all of the profits in markets that are out of favor, they can retain some of the profits to boost income rather than expose more of their portfolios to risk they would not normally take.

 

There are multiple ways to boost income from growth and other instruments without having to unduly increase exposure risk.

 

Commodities are another way to hedge inflation risk if client exposure to the gold market has gotten out of balance.

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