I lost money owning gold (IGT) last week, while the stock market went up. That’s a little painful, but the model indicates to own gold again this week. Gold is simply one of the few assets that has positive momentum, even if it’s slight. (As an aside, bonds and real estate are close behind.) I’m not sure if momentum will continue to favour gold, but it’s a good place to be given the uncertainty in Spain. Should that situation worsen, gold (as a safe haven) will be popular and profitable (although I deplore profiting from the misery of others).

The Bank of Canada recently (I don’t have the exact date) held interest rates unchanged at their current low rate. It’s interesting to see the posted long-term mortgage rate move lower (5.24%, from 5.44% two weeks ago). Government bonds have inched up in yield, but the economy appears to be safe from a bear market at this point. Still, a balanced portfolio should maintain an overweight in bonds, given their current positive momentum.

Stocks rose 1.35% over the past week, slightly reducing the amount by which the stock market appears undervalued to 10%. Recall that during long steady bull markets, the stock market appears slightly overvalued. This could be a cheap level at which to buy in, but that doesn’t mean it couldn’t remain cheap for an extended period or even become cheaper.

Market Outlook June 11, 2012

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