Market Update, 29 Jun 2012

Market Update, 29 Jun 2012

This week saw a reversal of last week's trend, with almost all investment categories showing losses.  Currencies and bonds were all lower, on news of new European bank bailouts and fears that next week will bring further easing from the ECB and Bank of England.  Most stock markets were also lower, with the Japanese Nikkei, up 0.6%, being the exception.

After the news on Friday, the Dow Jones finished off 0.35%, while the S&P 500 closed up 0.13%.  Gold stocks were 0.61% higher for the day, but finished the week down 1.9%.

Like last week, the big moves were in commodities.  The week's biggest winner was coffee, up 7.5%, followed by crude oil, up 4.3%.  All of crude's gain came from Friday's massive 6.6% rise.  Cotton was the biggest loser, down 4.7%.  Silver also posted a loss of 1.1%, while copper rose 2.9% for the week.

On the longer term horizon, only TLT, representing the long term treasury bonds, is up from one year ago, and it is up almost 30%.  Every other category is down over the last 12 months, although the Dow and S&P are close to breaking even.  I am still long TLT in my own portfolio.  The position is up about 12%, but off from it's high water mark of 17%.  The area just above 2.5 grams continues to act as resistance.  If there is more unexpected bad news from Europe, or if the world's central banks make a coordinated effort to further lower long term interest rates, TLT could be a beneficiary.  I'm watching it closely.

To recap, don't be fooled by the press announcements of stock markets jumping higher on "good news" from Europe.  True, investors decided to dump their fiat currency for value producing stocks, pushing stock prices higher; but they were even more eager to get their hands on gold!  Thus the price of stocks in gold declined on the news, even as the price in USD rose.  Remember that physical gold in your possession is a far safer investment than any paper asset, whether currency, bond, or stock.  Risky paper assets have their place in growing your wealth, but when you want to go "risk off", you want to hold gold.

Table of prices in gold for week ending 6/29/2012

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