1. The selected timeframes reflect the low points of the equity market (with exception of 23 Nov)
2. AUD Gold price fairly flat to lower since 23 March
3. Bitcoin outperformed Gold significantly with BTC/Gold ratio expanding by 2.65x from 3.8x to 10x
4. Bitcoin stole Gold's thunder since Sept
5. Gold equities actually performed better than gold even during the period from Sept-Nov indicating the markets expecting gold to recover over time, so GDX is currently ahead of Gold's progress at this stage - Gold/GDX ratio declined by 24% since March lows
Gold has been the best asset class return in 2020 (to date), but looking at this visual capitalist chart, you would have to go back to the late 80s to see Gold make a back to back years of strong returns.
It got me thinking though we could say that past performance is not a good predictor of the future. Almost everyone assumes that Gold or precious metals would storm much higher in the coming years because of a weakening dollar (or rather a collapsing dollar) and further currency debasement from more money printing. Would there be any chance that everyone would be getting this wrong too the way everyone got totally blindsided with the unexpected market rally since the March lows?
Let me clarify, I am not saying Gold's longer term outlook is looking less certain, I am saying we can remain optimistic but we should not be totally fixated. The one thing I have learnt is not to get too fixated with a view as far as the markets are concerned - markets can behave very differently to what we expect it , clearly 2020 has proven so. Money flows play a significant part in the outlook of an asset class and at this moment, it is tilting very strongly towards BTC at the expense of Gold. Perhaps, Gold is being cast aside for the time being as the vaccine narrative takes centre stage and would make a strong return again in the months and quarters ahead when it turns out that the vaccine solution may not be the sole panacea that the economic recovery needs.
Short term, AUD Gold just broke the all important A$2557 to be at A$2546 currently, as Gold stayed slightly weak even though the USD has dropped.
IMO everyone should have a decent allocation to gold/gold stocks , so unless one is substantially overweight in gold equities, there is less to be concerned about in continued holding. But to the overexposed, I had provided my caution a week or two ago rather subtly.
