Wells Fargo doesn’t like gold
Wells Fargo’s (WFC) head of real asset strategy, John LaForge, told Kitco News that gold (GLD) no longer looks attractive based on the way the metal has been behaving in response to recent economic events. He said, “Stocks, in the last few weeks have hit, and you see the days when stocks really get hit, and what does gold do? Gold is up $3, it’s up $5, it’s up $7. I think where we are in this gold super cycle, this long cycle with commodity prices, is we’re kind of in the dull period.”
Gold muted as stocks tank
On May 5, after president Trump’s tweets, the trade war escalated further. Since then, the S&P 500 (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite (QQQ) have lost 4.7%, 4.3%, and 7.1%, respectively, as of May 28. However, despite these concerns and pressure on stocks, the SPDR Gold Shares (GLD) has remained flat, while the VanEck Vectors Gold Miners ETF (GDX) has gained a meager 0.6%.
Look to alternatives
Usually, gold acts as a safe-haven asset when other risk assets are not doing well. But this time around, gold has not reacted as expected. Therefore, LaForge thinks that there are better defensive alternatives for investors. He said, “If you want to get defensive, you’re almost better off in other defensive assets too, so the dollar versus say, gold, if you see volatility. Gold’s just not acting that well, frankly.” The US dollar (UUP) and the Japanese yen usually act as alternatives to gold as defensive assets.
He, however, still maintained his price target of $1,300 per ounce for gold but believes that there is a bias to the downside for the metal.