Bloomberg: Gold Bugs Catch a Break

Source: Bloomberg Businessweek

It’s easy to see the investing wisdom in Warren Buffett’s admonition to “be fearful when others are greedy, and be greedy when others are fearful.” Acting on that advice is supremely difficult. Still, investors who gambled on gold at the end of an especially frightful 2013, have significant gains to show for it.

Gold has climbed 7.2 percent this year as stocks have dropped 4 percent. Jeffrey Gundlach, founder of DoubleLine Capital, an investment firm overseeing $49 billion, said in his 2014 forecast in January that gold was ready to rebound. “Sentiment is black as night on gold so I’m actually long on gold,”

Gold’s rise in the last five weeks has caught many analysts by surprise. Gold gained again in trading today, as Janet Yellen delivered her first testimony to Congress as chair of the Federal Reserve. Yellen said she expected “a great deal of continuity” with the monetary policies of her predecessor, Ben Bernanke. The Fed is now buying $65 billion in bonds each month to stimulate the economy, down $20 billion from its 2013 pace. Many gold bugs predict inflation will follow the central bank’s accumulation of a $4.1 trillion balance sheet.

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