Trader’s Narrative

Unless something really drastic happens in the light trading left in the year, this decade belonged to commodities and especially, gold. Here’s a chart showing how much you would have if you invested $100 in each major asset class since 2000:

Source: Bloomberg

Knowing about the 18 year cycle between commodities and equities, this isn’t surprising. In fact, thanks to this long term historical pattern, we can look forward to almost another decade of the same type of outperformance.

What I am surprised at is that I didn’t veer away from my own personal tendency of trading gold just like any other asset. After being a skeptic for far too long, I’ve come around to see the clear secular bull market but I continue to believe that it is smarter to trade around the precious metal, rather than to fall to the misconception of gold bugs in believing it to be ‘real money’ or ‘a store of value’, etc.

If you were reading this blog recently, you’d know that while acknowledging the long term bullish tendencies of gold, I’ve been very bearish in the short term. In fact, I wrote several negative comments in late November and early December even as gold was rising to $1200 and beyond:

• Gold Goes Parabolic Again & Again & Again
• Gold Bulls Are Rebels… Just Like Everyone Else
• S&P 500 Gold Hedged Index: Another Sign Of Gold Top

These repeated warnings were written right at the top, before gold dropped 11%. I still think gold will gravitate towards previous resistance (now support) near the round $1,000 level. But don’t worry, even if such a correction happens between now and the new year, gold’s glitter continues to sparkle in the light of the decade.