In October 1939, British Prime Minister Winston Churchill said in a radio broadcast; “I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma.” Replace the word “Russia” with “Gold” and you’ll have a good idea of how many gold investors have felt recently!

Gold is prized as a portfolio diversifier in part because it is so uncorrelated to the movement of other asset classes. When SMI defines diversification as “owning assets that march to the beat of different drummers,” this is exactly what we mean. It’s why gold plays such a prominent role within SMI’s Dynamic Asset Allocation strategy.

But this tendency to unpredictably do its own thing can sometimes be frustrating for investors. Such has been the case lately. Ironically, this has been true in both directions — one camp of investors is surprised that the current gold price isn’t significantly higher, while another is surprised it isn’t significantly lower! Let’s briefly review both of these perspectives.

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