One catchy investing maxim that’s popular this time of year is “sell in May and go away,” the notion that investors should cash in their investments and take the summer off. Historically, this hasn’t been a bad strategy.
The economy has been in choppy waters lately. A rise in manufacturing is negated by a weak jobs number. Housing market signs of life are impeded by gas prices. The euro zone appears to improve, then a sovereign debt rogue surfaces in Spain.
To paraphrase the great Steve Martin, today’s investors are very passionate people and passionate people tend to overreact at times. An overreaction is exactly what’s happened in gold and global markets in recent weeks.
After prices fell 10% in December, many investors wondered if the bull market in gold was running out of steam. That was before Federal Reserve Chairman Ben Bernanke swooped in with a “red cape” and fired the bulls back up.
While Chinese demand growth for commodities is not expected to be as robust as it has been historically, demand is expected to pick up throughout 2012. China’s rapid growth and increasing reliance on other countries for key resources has made a powerful case for commodities over the past several years.
What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks? An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce.
This rare territory is often called "oversold" by traders and portfolio managers. That simply means too many investors have sold their holdings in a condensed timeframe, driving the price down more than its historical average.
Perhaps no industry has experienced a stronger recovery from the depths of the recession than the global automobile industry. Around the world, cars are rolling off the lot at a pace not seen in years.