Equities Slump, Gold Rallies as Contrarians Predicted

What a difference 10 days can make.

Back then, DoubleLine CEO and CIO Jeffrey Gundlach warned investors to think twice about the “metaphysical certitude” of many analysts, who saw a rosy equities market and expressed a “ giddy” distaste for gold.

Fast forward to Friday’s trading, and experts like Gundlach — along with those at Vanguard and other investments group — appear to have been right on the mark.

The U.S. equities markets fell more than 1% both Thursday and Friday over concerns regarding slower growth in China, along with political problems in Turkey, Argentina and Ukraine.

The SPDR S&P 500 ETF (SPY) tells the story. It’s down about 1% year to date.

What’s up? SPDR Gold Shares (GLD) has improved 5% so far in 2014, while the Market Vectors Gold Miners ETF (GDX) has soared 12%. (Gundlach had pointed to miners as a potential winner for this year in his Web-based outlook talk.)

After moving aggressively into equities, especially in the second half of last year, “investors may view gold as part of a way for them to balance risk affecting their portfolios this year,” said Juan Carlos Artigas, head of investment research for the World Gold Council, in an interview with ThinkAdvisor.

“Plus, people realize that risk is not going away, and gold — as a strategic asset — can be a component of their risk management strategy,” Artigas said.

In contrast to the 5% jump in GLD, the iShares Silver Trust (SLV) is up a modest 2% in January. The Global X Silver Miners ETF (SIL), though, is on a tear — rising about 11% in early 2014.

Other areas that are heating up include those with a focus on natural gas. The United States Natural Gas ETF (UNG) has rocketed 10% in January.