Flash back to the summer of 2011. The U.S. Congress struggled with a decision to raise the debt ceiling. The “PIGS” (i.e., Portugal, Italy, Greece, Spain) had dramatically overspent, endangering the existence of the euro-zone. Stocks cratered. The CBOE S&P 500 Volatility Index (VIX) soared. Meanwhile, the SPDR Gold Trust (GLD) catapulted 26% in a matter of six weeks.
Flash forward to the summer of 2014. Tensions have flared up between Russia and Ukraine, but the conflict has had little direct impact on stock assets. Even fewer seem concerned about the sustainability of country debt in Europe. What’s more, gold bears have hammered the idea that the yellow metal might serve as a safe haven against political turmoil, inflation or electronic money printing.
Do bears have a point? They might. Investors have not rushed into iShares Silver (SLV) or SPDR Gold Trust (GLD) in response to recent events in Crimea or Syria. In addition, increases in quantitative easing (QE) by the U.S. Federal Reserve, the Bank of Japan as well as the Bank of England did not result in rapid price appreciation for precious metals proxies. On the contrary. The long-term downtrend for funds like ETFS Physical Precious Metals Basket (GLTR) remains intact.