Gold: It’s over

RELATED QUOTES

SymbolPriceChange
CBA.AX78.89-0.120
QBE.AX11.93+0.080
WES.AX43.94-0.050

The Dow (^DJI) and S&P/ASX 200 (^AXJO) (XJO.AX) are back on the up, as are dividend stocks, which is more than can be said about gold over the past 18 months.

“Buy the dip” is the latest mantra going round the broker scene.

The dip was yesterday. Sorry if you blinked and missed it.

Overnight Tuesday, the Dow jumped 115 points to close at the pleasingly round number of 13900. The S&P/ASX 200 is trading nicely higher in early afternoon trading.

Forgotten are the Italian elections, for a day at least. But gone they are not, with centre-left leader Pier Luigi Bersani declaring Italy is in a “dramatic situation.”

Drama and Italy are joined at the hip. I don’t think we’ve heard the last of this soap opera, featuring the convicted criminal and comedian Beppe Grillo, the philandering Silvio Berlusconi and a cast of 61 million Italian citizens.

Bernanke Day

But today is Bernanke Day.

The Chairman of the US Federal Reserve strongly defended the central bank’s bond-buying extravaganza amid fears ultra-low interest rates will prompt excessive risk taking and distorting financial markets.

Cue the latest catalyst for the US market to rise.

And where US markets go, Australia slavishly follows — the S&P/ASX 200 jumped, lead by — yes, you guessed it — yield stocks, including Wesfarmers (WES.AX), QBE Insurance (QBE.AX) and Commonwealth Bank (CBA.AX).

Speaking of QBE, Investment Analyst Scott Phillips named the insurance giant as a best buy now in the December 2012 update of Motley Fool Share Advisor.

If ever there was any doubt that rational investing beats emotional investing, recommending unloved QBE in December at $10.50 is all the proof you might need.

Love, hate

Back to Ben Bernanke…

Investors seemingly love Bernanke, or are queuing up to crucify him when (not if, according to the bears) inflation takes off and markets crash again, just like they did in 2008-9.

Today, love is in the air.

Interest rates are set to stay lower, for longer, and in the absence of alternative homes for cash, the share market wins.

For now, Ben says all is in hand — interest rates, inflation, the US economic recovery — and he has the “belts and two pairs of suspenders” to steadily, gradually, carefully deflate the low interest rate bubble.

Bulls buy stocks, bears buy gold

Time will tell.

In the meantime, the bears will buy gold. The bulls will buy stocks.

And Foolish Investors will slowly, steady, patiently accumulate shares in good companies trading at attractive prices.

I haven’t mentioned gold for some time now, fearful of the “gold bug” hate email, and mindful not to kick a dog when it’s down.

Speaking of hate mail, yesterday’s edition of Take Stock wasn’t quite to the liking of one anonymous reader…

what sh*t you guys are about. effing hell. get lost you idiotic pieces of garbage. go take a bath as you stink.

Thanks for the advice, but we took a shower instead of a bath. Hope that’s ok.

If there’s one thing I’ve learnt in my 15 years at The Motley Fool, it’s that you can’t please all the readers all of the time.

Not everyone will agree with my views — just like I don’t agree with everyone else’s views — but if we keep picking winning stocks we’ll have more friends than enemies.

Gold: hanged, drawn and quartered

My view on gold as an investment hasn’t changed — it’s a very heavy metal, difficult and expensive to store, pays no dividend, and capital appreciation relies totally on someone else paying more for it in the future than someone is willing to pay today.

From September 6th 2011, when Foolish colleague Morgan Housel publicly and boldly declared you “Dump your gold in favour of stocks“, it’s been a one-horse race…

Gold down 16%.

Stocks up 24%

Bring on the hate mail. I’m showered and ready…

The winners of tomorrow…

Today, we’re finding the most attractive investments are currently residing in the largely in the medium and small-cap space.

Put simply, that’s where much of sharemarket history suggests they are often found.

Carsales.com (CRZ.AX) was once a small-cap. Today it’s valued at $2.1 billion.

Flight Centre (FLT.AX), one of the stock market’s great success stories, is valued at $3.2 billion.

Both are good companies today. They’ve got a decent shot at being decent winners in the future too.

But to find the really big winners of tomorrow, you’ll have to do a little more digging… just like we’ve been doing.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

Until next time, as ever, we wish you happy, and profitable investing.

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Motley Fool General Manager Bruce Jackson owns shares in Commonwealth Bank and Wesfarmers.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9274+0.0012+0.13%
    AUDUSD=X
    0.5516+0.0004+0.06%
    AUDGBP=X
    0.6703+0.0007+0.10%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg