Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Wanted! Bearish Gold Bulls

Commodities / Gold and Silver 2012 Mar 16, 2012 - 01:17 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleGold's bull run is exhausted, apparently. Yet it's due only a shower, not a bath...

SO GOLD BULLS are turning bearish. But not really.

"A number of things which would have kept people with an eye on the upside for gold prices have now been neutralized," says RBS's Nick Moore, who cut the state-owned UK bank's 2012 targets for precious metals other than gold in January.


Like the rest of Bloomberg's regular gold-forecaster respondents, Moore says "Everything's beginning to look as if it's turning the corner...We've passed the point of maximum despair."

And without despair, gold must be set to fall hard, no? No indeed. "Gold can now settle back," reckons Moore, plumping its pillows for an afternoon snooze.

"The one danger" for gold prices, says British MEP Nigel Farage – who used to trade base metals, and so is less clueless than your average politico – "is that the bullish consensus on gold is now higher than it's been at any time for the last two or three decades." But while that consensus means "the short-term speculative market [might find] itself a bit long of gold," Farage tells King World News, the worst that might happen to gold is "that it could have a dip." Do fetch a towel, would you?

At Mineweb, the same story: "Is gold now the contrarian play?" asks Geoff Candy, answering his own question just by raising it, and finding only "fairly optimistic" calls from even those analysts warning that gold could lose its mojo short term. Doom-n-gloom heavy Dylan Grice at Societe Generale agrees, writing this week how "Gold just isn't the misunderstood, widely shunned asset it was a few years ago," but again finding only good cause to stay long from here, rather than taking the contrary path. And "10 years ago gold was not owned by retail investors but was primarily held by central banks," nods the UK's Armstrong Investment.

"Strong performance, uncorrelated returns with other asset classes and the advent of easily-accessible ETFs have seen investors make ever-increasing allocations to the precious metal." Yet once more, "An allocation to gold [still] makes sense in a diversified portfolio."

So far, so what. But hold on – "Investors should not view [gold] as a safe haven without its own inherent risks," Armstrong go on – about as bearish a view as you'll find amongst long-term gold bulls today. Anyone wanting a real sell-off in gold, most especially those who then expect it – revived and refreshed – to resume the bull market, might have to settle for this.

"Over the long term," says Armstrong, "gold has been a perfect portfolio diversifier – positive returns with no correlation to traditional asset classes. [But] over the past three years gold prices have shown a correlation of +0.8 with the S&P500."

What does that mean? If gold and US equities were joined at the hip, they'd show a positive correlation of 1.00. And if they moved in opposite directions – but by precisely the same proportion each time – they'd show a perfectly negative correlation of 1.00 instead. Whereas over the long-term, the average correlation between gold prices and stocks actually comes out at zero. Making gold, as Armstrong notes of the past, the perfect foil for investors wanting to improve the risk-return profile of their position in stocks.

So today's current 3-year figure, therefore, up near gold's strongest-ever link with the stock market, does suggest gold has dropped nearly all of its diversification powers. But only if you neglect how that magic comes about in the first place. Not by sitting bang on zero forever, but by swinging now higher, now lower, and averaging out at "non-correlated" by in fact being positive or negative at any one time.

Overall, since gold prices began to move freely amid the last pretence of a Gold Standard in the late 1960s, the metal has moved in the same direction as stocks – on a quarterly basis – for roundabout half of the time. It's gone in the other directon to stocks for pretty much the other half of the time, making gold uncorrelated in total.

Neither positive nor negative, gold in the long run is just unconnected. Which suggests that, whatever next comes for the stock market, trying to time a gold sale (or purchase) based on today's correlation is unlikely to pay.

Chalk another fake bear up as only bullish long term.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules