Gold Is Way Down. Here’s When To Worry. - Kanebridge News
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Gold Is Way Down. Here’s When To Worry.

By JACOB SONENSHINE
Thu, Feb 11, 2021 3:57amGrey Clock 2 min

Gold has fallen from its lofty August levels. The precious metal appears to be at a crossroads, but the price likely has to slide more from here in order for investors to get really spooked.

The price of gold ran up 37% between March 15, 2020—roughly when investors were most fearful about the economic damage from the Covid 19 pandemic—and August 2, 2020. That day, gold hit an all-time high of US$2,028, as seen by the Gold Continuous Contract (GC00). Even though stocks rose in that time span, demand for haven assets remained strong, as there weren’t many meaningful signs that the world would soon emerge from the pandemic.

Since hitting a record, the commodity has fallen 9% to date. “The long-term uptrend in gold is teetering on the edge,” wrote Jason Goepfert, founder of Sundial Capital Research in a note.

While gold has been in a concerning downtrend of late, gold-related stocks offer some optimism for the precious metal. Gold mining stocks are typically correlated with the actual commodity price. As an example, Goepfert highlights the VanEck Vectors Gold Miners ETF (GDX), which has largely echoed gold’s moves over the past year. The ETF rose more than twofold between mid-March and early August, before falling 20% from the August level to date.

But now gold mining stocks suggest there could be brighter days ahead for the commodity. Roughly 20% of gold mining stocks have been trading above their 200-day moving averages on most days in the past two weeks, down from more than 85% of those stocks recently, Goepfert said. This cycle has occurred several times in the past few years and usually precedes gains for most gold stocks in the coming three-month period, Goepfert says.

Even if gold price trends cannot reverse themselves, it likely isn’t time to get too bearish yet. The key price level to watch for the contract for the actual metal is US$1780, according to Sevens Report Research. A dip below that would be a negative signal, representing a double-digit percentage drop from the current level. Gold dropped to around that level in late November, but quickly popped back.

Gold may be at a fork in the road, but investors might not want to unload their gold holdings just yet.



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The S&P 500 index has been crushing private-equity returns in the past year, and Blackstone ’s second-quarter results illustrate that trend.

As part of its earnings release early Thursday Blackstone said its corporate private-equity returns in the year ending in June were 11.3%. That compares with a 24.5% total return for the S&P 500.

In the prior year ending in June 2023, the S&P 500 topped Blackstone with a 19.4% return against 9.7% for the firm’s corporate private-equity business, which has $145 billion of assets and remains one of its most important areas along with real estate.

Blackstone is the leading alternatives firm with over $1 trillion in assets under management and has the largest market value of any public investment firm at more than $160 billion.

Driven by Nvidia , Microsoft , Apple , Amazon and other big technology stocks, the S&P 500 has handily topped most asset classes in the past several years.

Another sign of more difficult times for private equity came earlier this week from Calpers, the $503 billion California pension fund, when it reported it s preliminary returns for its fiscal year ending in June . Calpers is one of the first major endowments or pension funds to report results for the June fiscal year. undefined The pension fund, a major player in private equity, said its private-equity investments gained 10.9% net of fees—although that figure is lagged one quarter. Calpers’ public-equity investments were up 17.5% in the year ended June—its strongest asset class. Private equity remains a favorite of many pension funds and leading university endowments like those of Harvard and Yale. Their view is that private equity can beat public-market returns over the long term.

But the private-equity business has gotten tougher in recent years due to keen competition for deals, higher interest rates and a less receptive IPO market, which has made exits tougher.

And private-equity portfolios of firms like Blackstone look nothing like the S&P 500, given their investments in small to midsize companies.

Blackstone, for instance, bought a majority stake in Emerson’s climate technologies business last year and more recently purchased Tropical Smoothie, a franchiser of fast-casual cafes. It also holds a stake in Bumble, the publicly traded online dating site, and it’s an investor in actress Reese Witherspoon’s media company, Hello Sunshine. Blackstone’s corporate private-equity business runs $145 billion and has 82 investments, according to the firm’s website.

Blackstone’s private-equity business has strong long-term returns including a gain of over 50% in the year ended in June 2021 when it handily topped the S&P 500 index.

But the S&P 500 index has become difficult to beat more recently and it’s dominated by some of the best companies in the world. It carries less risk than private equity, given the cash-rich balance sheets of its leading companies like Apple , Microsoft and Alphabet .

Private-equity firms, by contrast, often use considerable leverage to boost returns. Investors can get exposure to the S&P 500 through index funds that charge 0.1% or less in annual fees and with immediate liquidity.

A key risk with the S&P 500 is its vulnerability to a selloff in the leading tech firms that now make up over 40% of the index. The recent rotation into smaller companies illustrates that.

Blackstone shares gained 1.1% to $136.31 Thursday in the wake of its earnings news as investors focused on rising investment deployments and positive management comments on the firm’s outlook.

The firm’s nearly $40 billion of inflows and $34 billion of capital deployment during the second quarter marked “the highest level of investment activity in two years,” Chief Executive Officer Stephen Schwarzman said in a statement.

Citi analyst Christopher Allen wrote in a note to clients on Thursday that while Blackstone’s overall performance was mixed, the outlook appears to be improving given fund-raising and deployment trends.

Investors also were heartened by Blackstone President Jon Gray’s comments about a bottoming in commercial real estate and strong capital deployment in that area.

But ultimately, the game for Blackstone and its alternatives peers is about performance—particularly beating low-fee public investments like the S&P 500. That seems to be getting more difficult.