Tags: MarketWatch | Arend | Gold | Trump

MarketWatch's Arend: Interested in Gold? Watch Donald Trump

Sunday, 08 Sep 2013 12:38 PM

By Michael Kling

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Is it time to buy gold?

MarketWatch columnist Brett Arends says it's at least time to re-examine the precious metal.

Wait to see what Donald Trump has to say, he advises, calling the real estate mogul a contrarian indicator.

Editor’s Note: New Video Exposes a ‘Great Retirement Heist’

Two years ago, Trump said he was taking rent on one of his New York office buildings in gold instead dollars. "The stampede into bullion that Trump predicted hasn’t occurred. Quite the reverse," Arends says, noting that gold has fallen from over $1,800 to about $1,400 since then.

"The time to buy gold aggressively may not come until Donald Trump says it’s finished. But maybe those who do not own gold should be buying a little right now."

Valuing gold is tricky because it generates no returns to analyze, no earnings reports, no dividends. Its price relies strictly on supply and demand.

There are many theories about valuing gold, he notes. If an ounce of gold equals the price of a man’s suit, it might be worth a few hundred dollars.

However, some metrics, such as the monetary base, make the argument that it is worth $6,000 an ounce, or at least should be.

On the other hand, based on modern financial analysis it has no value because it produces no cash flow.

Many investors like gold because it often rises when stocks and bonds drop. For that reason, he notes, some advocate putting about 5 percent of your portfolio into gold.

"Two years ago everyone was talking about gold," he says, citing government debt-ceiling battles, a dysfunctional political system, Standard & Poor’s government downgrade, and rising national debt. "Today almost nobody is talking about gold."

Independent technical analyst Daryl Guppy suggests following the price of silver to see where gold is heading.

Silver has foreshadowed gold since 2011, he writes in an article for CNBC.

It peaked in April 2011 before gold peaked in September 2011, and then dropped shortly before gold.

"The collapse following these price peaks showed the same behavior for both silver and gold," Guppy states. "Traders who followed silver had clear warning of how gold would behave once the peak was established."

"In 2013 the silver price lead has narrowed to days from weeks or months. There is now a closer relationship between the price behavior in silver and gold. However, a lead of several days is still enough to give gold traders an advantage."

Editor’s Note: New Video Exposes a ‘Great Retirement Heist’

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