Will Sequestration Bolster Gold? – SPDR Gold Trust (ETF) (GLD), Goldcorp Inc. (USA) (GG)

Good for gold
The series of problems that would be created by sequestration cuts creates a cascading effect of positive catalysts for the gold market. Initially, the cuts will lead to increased economic uncertainty, which is bullish for gold. As jobs are lost, the Fed’s targeted unemployment goals become a distant memory and quantitative easing continues or ramps up. As more money is pumped into the economy, inflation — which I already see as inevitable despite the somewhat dubious Bureau of Labor Statistic claims that inflation is in check — becomes even more certain. Inflation expectations are also bullish for gold. Overall, the general stance of the economy currently favors a run higher.

Why, then, has neither gold nor any of the major gold miners, such as Barrick Gold Corporation (USA) (NYSE:ABX), Goldcorp Inc. (USA) (NYSE:GG), or Newmont Mining Corp (NYSE:NEM) traded higher? All three of the miners are down double-digits already this year. That’s due in part to higher production costs — as Barrick reported recently — but the miners also tend to react in exaggerated ways when facing recessionary pressures.

GLD data by YCharts.

Gold itself, and, in fact, Wall Street in general, have not moved much ahead of the deadline. While the bluster from Washington continues, just as before, another deal is expected. What this means is that if one doesn’t come, the move will be even more severe. Getting positioned ahead of Friday is a tricky prospect, given how much data is to be released this week. Still, for the medium and longer term, I think gold still looks attractive, making the current weakness a nice buying opportunity.

Goldcorp is one of the leading players in the gold mining market. For the past several years, investors have been the beneficiaries of several successful acquisitions and strong organic growth. Goldcorp’s low-cost production of one of the most sought-after metals in the world continues to make them an attractive choice for long-term investors. Click here for our detailed ticker report to discover more about this mining specialist.

The article Will Sequestration Bolster Gold? originally appeared on Fool.com and is written by Doug Ehrman.

Fool contributor Doug Ehrman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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