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Gold future

Gold future is now reaching all time high $1,900 an ounce due to the escalated US-China tension.
https://finviz.com/futures.ashx

Comments

  • I sold some GDX (the miners) at the open. The big users of gold, India & Asian cultures, are not buying at these levels. I expect that the price will begin to fall back but I have no clue as to when. Just taking some profits.
  • edited July 28
    The dollar’s tanking after decades of strength. Some of that relates to the Fed’s recent printing spree and some to our dismal failure dealing with Covid. Reminds me of the scattered bits I can recall from the late 60s and early 70s - several years before inflation really took off. Dollar down. Gold up. Repeat. Repeat. Nixon imposed wage and price controls in ‘70 or ‘71, although inflation wasn’t bad at that point compared to what it would be a few years later.

    It’s not rocket science. We normally work for, trade in and buy things with dollars. When the value of the dollar falls, the price of what we buy goes up. However, the linkage isn’t real direct. Takes time for supply chains and consumer expectations to catch up. So don’t expect things to cost more tomorrow than today. In addition, the monkey wrench that is Covid has the economic picture so distorted now that it’s hard to get a good fix on relative valuations.

    As for gold, I’ve seen it rise - and I’ve seen it fall - many times over my 70+ years. Pretty stuff too. It runs more on emotion than on fundamentals - although the fundamentals are currently in its favor. Some will get rich this time around. And some will get greedy and loose a fortune when the tide turns.

    From Disney’s Beauty and the Beast: “A tale as old as time ...”

    Just an added thought here - Conventional wisdom often links gold’s price increase with the current inflation rate. That’s a long stretch and normally not the case. Gold tends to move in sharp rapid movements like we’re witnessing. So at any given time, it’s racing ahead of or trailing inflation. Just a rough guess - but gold bullion looks to be up 20-25% over the past year. Miners are more volatile with many mining funds up 40% or more in the past year. Bad as inflation has been, it’s not running at 40% annually. However, over very long time frames it’s likely gold’s as good an indicator of the long-term inflation rate as would be real estate, lumber, tomatoes or coffee. Personally, I’ve some limited gold exposure, but I feel safer playing around the edges. Many real asset / commodity funds provide limited exposure to gold as does PRPFX. Some of the EM funds are nice indirect plays on the metals as well.
  • Would oil be a drag on a commodity fund?
  • Howdy folks,

    Looks like their took your cue Mark. Profit taking. Old Art used to say, 'just backing and filling'.

    Natural resource or commodity funds?!? They're talking now about the permanent decline of oil. Throw in the rise in precious metals, balanced by tanking of industrial metals and add the bonus of timber resources and WTF knows what's happening in natural resource funds. We still own a bit of PRNEX but it's cut to almost nothing. I'd rather target the group with an ETF or individual stocks.

    Too confusing for rono

    peace,

    rono
  • edited July 28

    Would oil be a drag on a commodity fund?

    Oil has been a tremendous boost for funds that invest in oil futures since the price went negative April 20. Over the past 3 months oil’s soared to over $40. I don’t even know how to compute such a phenomenal rate of return from -$30 to +$40. (maybe “a gazillion percent”?). The supposition behind @little5bee ‘s question must be that oil has entered bubble territory.:)

    All the “cards“ seem stacked against oil from a casual viewer’s vantage point. Fracking, electric cars, shared vehicles, wind and solar, global warming / ecological related restrictions. What’s interesting is that with air travel off 50-75% during the pandemic and carriers mothballing aircraft, the price of oil has hung in there. So you have the eventual resumption of air travel to look forward to. Also, not all oil derived products are burned as fuel. Asphalt used for paving is one example. Lord knows we have plenty of roads in need of rebuilding.

    There aren’t a lot of pure commodities funds. The ones that do exist play the futures markets thru derivatives. That’s expensive and risky. But who wants to take delivery or crude oil or lean hogs? I put a little in Invesco’s BRCAX shortly after oil fell below 0. This one’s the real McCoy as far as commodities funds go. The fund has done well since than. PRENX does not call itself a commodities fund. It invests in nat. resources, concentrated in refiners. Even its manager has suggested for at least 3 years now (in annual reports) that this fund is not currently a good investment, as he foresees a long bear market in the nat. resources area. I’m eager to read his next fund report to see if his thinking has changed any. PRAFX is as close as Price comes to having a commodities fund. It is less exposed to oil and appears to have a bit more in gold judging from its behavior.

    Disclosure: I own all 3 of the above mentioned funds.

  • Air travel is one of the major consumption of oil which has declined significantly during this pandemic. Fewer vacation travelers today and business found online routes via Zoom, WebEx, and Teams to be functional to reduce their travel. We have not left our house other the grocery stores and dental appointments. Also canceled several family vacations. Think @littlebee question point to the current oil price being questionable.
  • @Sven Exactly. Easy to make a profit in ANYTHING if you invest at the bottom. Let's see what happens in the future...ie, after the Fed stops pumping money into the system...whenever that will be. Just seems like prices on everything are stretched right now because of "expectations".
  • edited July 28

    @Sven Exactly. Easy to make a profit in ANYTHING if you invest at the bottom.

    Corollary: Easy to lose money in ANYTHING if you invest at (or near) the top.
  • Yes. That's why I don't invest at the top.
  • I didn’t mean to insinuate you did. I tried to answer your concerns thoughtfully about how oil impacts various commodity related funds. That’s all. Actually, you can go to M* or Lipper and look at the 1, 3, 5 year returns for those types funds if you’re looking for a short answer.
  • @hank I was joking. Tried to insert a "wink" emoji, but apparently it didn't work. Should have inserted this: ;)
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