Gold up 3.5% this month: Will the "January effect" spoil the stock party in 2014? - Wealth Managers

"There is a serious money flow from the equity market towards gold"

Even though gold fell 2% on the week after five straight weeks of gains, the yellow metal has finished January 2014up about 3.5% for its first monthly rise in five.   

The metal pared earlier losses to settle near $1,246 late Friday, buoyed by the emerging-market currency crisis and the ongoing decline in the U.S. stock market. Silver, meanwhile, shed about 3.5% on the week to close near $19.17.

"There is a serious money flow from the equity market towards gold, and we think that this could continue for the next couple of weeks," said Naeem Aslam, chief market analyst at AvaTrade.

However, gold "is struggling to break above the $1,275 level or below $1,225, and I think we will stay around these levels again next week as market participants position themselves ahead of the U.S. nonfarm payroll numbers" for January, saidAfshin Nabavi, head of trading at MKS SA. 
January barometer right 73% of the time
In contrast, U.S. stocks fell Friday, with the S&P 500 posting its first monthly loss since August, down 3.1% in January and 0.21% on the day. The Dow Jones lost 0.45%, while theNasdaq dropped 0.14%.

The dismal performance of stocks after a blazing 2013 has some many asking: "As January goes, so goes the year?" The question refers to the so-called "January effect," meaning that historically, the tone of stocks' annual performance often depends on how well they did in the first month of the year.

"The January barometer has been right in 62 of the last 85 years, or 73% of the time," CNBC noted." Since 1929, the index followed January's direction 80% of the time when it finished positive, and 60% of the time, when it finished negative. More recently, in the past 35 years, the S&P 500 followed January's direction 25 times, or 71% of the time (83% of the time for the Dow, and 74% of the time for the Nasdaq).

"Compared to other market-timing indicators that are out there, this one appears to be one of the most accurate," saidMichael Cooper, a finance professor at the University of Utah who has extensively studied the January indicator.
Like stocks? Root for Seattle
Investors won't know until December how the January effect will play out for stocks. But many will be watching another stock-performance indicator this Sunday. As Wall Street Cheat Sheet noted: "In the 47 Super Bowls since 1967, the S&P 500 has performed better when the NFC wins, according to research firm Bespoke Investment Group. When a team from the NFC wins, the S&P 500 has gained an average of 10.4% for the remainder of the year, more than double the 4.3% return when a team from the American Football Conference wins the Super Bowl. Furthermore, the stock market finishes in positive territory for the year 80% of the time with a NFC win compared to only 63.6% with an AFC win."

Whatever happens in the big game, investors will sleep easier Sunday night if their portfolios are properly diversified across a range of asset classes, including gold, silver, and rare coins. If the January effect does kick in this year, a Hail Mary pass might not even be enough for stocks to beat precious metals in 2014.

More information can be found online at http://www.goldbullionadvisors.com