Is the recent gold sell-off a buying opportunity for investors? – by Ian McGugan (Globe and Mail – November 25, 2016)

Gold investors are feeling hard done by and for good reason.

In the run-up to the U.S. election, many forecasters, from Société Générale to ABN Amro to Bespoke Investments, assured their followers that precious metals would soar in value in the unlikely event that Donald Trump were to win. The prognosticators reasoned that people spooked by Trumponomics would dump stocks and take refuge in gold.

So much for forecasters. Only hours after the election, major investors performed an about-face on the merits of Mr. Trump’s economic policies and decided to embrace stocks while dumping gold – just the opposite of what had been predicted. The precious metal’s price has plunged since election day, falling from $1,275 (U.S.) an ounce to $1,181. But does that mean a buying opportunity is opening up?

The answer hinges on your opinion of Trumponomics. If you believe the president-elect’s plans to cut taxes and spend on infrastructure will lead to a Reagan-style bull market on Wall Street, then gold deserves to be shunned. Stocks offer much better value.

But if you’re less confident of what lies ahead, gold merits a closer look. Think of it as a bet on pessimism. Devoting a small part of your portfolio to the metal offers insurance if an economic shock sends people scurrying for safety.

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