Smart Money Is Moving Into Gold As Volatility Returns

The subject line of this week’s blog comes straight from John Mauldin.

I don’t know John but I’ve been on his free weekly newsletter since the late nineties. John’s focus is economics and global politics but I still read it because this is what most people are looking at.

It’s this data that almost everyone is scared about. So this gives me insight to what people are looking at that’s scaring them. Because most of the time it’s not price that’s scary, it’s information. And afterall aren’t we in the information age?  

This is not a hit-piece on John or Gold…

…or any of the people he mentions in his advertisement below.

This blog is how you/we can check out someone else’s narrative. And say, “is that true?”

So it caught my eye when I (me and a million other people) got an email from John talking about how the “smart money” is now buying gold because of volatility.

One of the assumptions, or the main assumption is gold is a place to be because volatility is back in the stock market.

Below is the exact add from John’s free newsletter so you can form your own opinion to what you think his main narrative is about gold.

The first piece of data that was checkable was the “Volatility Returns” part. We can easily check to see if volatility had returned to the stock market.

Volatility Returns to The Stock Market  

As you might be able to tell, “the VIX made a triple bottom at 9 on October ‘17, November ‘17 and January 2018. And then on January 3rd the VIX jumped from 9 to 37 and has stayed above 15 since.

So yes, volatility did return. BUT what happened to gold?

Did Gold Move Higher When Volatility Jumped?

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I ask this because John’s implied theme was gold was going higher because Volatility had returned to the markets.

So I checked.  Did gold jump… or at least move higher?

Below is a price chart of the Volatility Index (top of chart) being compared to gold (bottom of chart).

Do you see what I see?

When the volatility spiked from 9 to 37, gold did… wait for it, nothing.

When Volatility quadrupled from 9 to 37, gold went from $1321 to $1335 an ounce or increased by 1.05%. And of this writing is at $1,306!

During the exact same time the VIX went from 9 to 37, the S&P500 index went from 2,705 to 2,648 or a loss of 2.4%. And of this writing the S&P500 index is at 2,654!

Was Gold a Safe Haven?

So yes gold did go up 1.05% while the S&P500 index fell 2.4% but hardly a “perfect-environment-for-gold” type of reaction.

I’ve been following gold for over 20 years and though gold has bottomed since December of 2015, the investment world is currently choosing different assets as a better hedge against volatility, uncertainty, inflation and a potential stock market correction.

Maybe gold will be one of those assets in the future, but right now gold is not participating in the, “this is where money is going to get protected right now.”

And so I put together a very in depth Gold Video for my Research subscribers. It’s 25 minutes of pure gold (I couldn’t help myself). And it provides a very clear view of where gold is today, what specifically needs to change for it to move higher (which includes specific price points) and how far we are from gold potentially resuming a very large move higher.

I looked at gold from more than 12 different perspectives. And what I discovered was a bit shocking.

Gold And Treasuries…

Most of John’s guests look at how gold was performing compared to US Treasuries.

As you know, I’ve written here and here how treasuries are in fourth place a four person asset race, so it should be of no surprise that Treasuries are also losing to gold.

What gold is NOT beating is what gold and potential gold investors should pay attention to most. This point and many other points is what I cover in the Gold Research Video.  

If you are a subscriber to my Research, then simply login to your Members Area and you’ll be able to find the in depth Gold Research Video on the “Research” page.

Simply scroll down that specific page where you normally find the recent and archived Monthly Research Reports and you’ll see an additional tab right there that says “Bonus Research.”

Tired of The Upsells Yet?

Why give this high quality research away to my paid subscribers without any up sells? Simple. I hated being up sold one newsletter after another after another after another which is the business model of the “pick of the month” newsletter world.

I wanted my subscribers to have a different experience. I wanted them to have clarity, consistency, transparency and a follow-able approach that would keep their money properly allocated so they could avoid the large 50% corrections while participating in the long bull runs.

Therefore I gave my Research subscribers my word that I would never up sell them any new Research that I produce.

The only thing my subscribers would pay more for is my Training or my Money Management (read: my personal time).

In Your Corner,

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RC Peck, CFP

P.S. Balanced portfolios are seeing unusual losses. Over the past few months, there was a 5-year high in days where stocks AND bonds both sold off. That raises worries that the typical 60/40 stock/bond portfolio allocation will suffer as bonds don’t lift when stocks dip.

Investors are noticing the old 60/40 split might not be able to help them going forward. If you are curious about a better way to potentially bring balance into the growth of your portfolio then perhaps a phone conversation with us is what you might be looking for. You can learn more here.

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