Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
“Debt, Not The Economy, Reaches Escape Velocity” With Graham Mehl - 29th May 16
EU Referendum, Black Vote LEAVE or REMAIN? Which is Worse for Racism for Britain's Ethnic Minorities? - 29th May 16
Billionaire Gross: Jubilee Debt Relief as Prelude to New Global Economic Order - 29th May 16
Wargaming North Korea - Assessing the Threat - 29th May 16
EU REMAIN Population Forecasts - England 4.1 million Explosion, London Migration Crisis - 28th May 16
A Guide to the Trump-Sanders Debate - 28th May 16
Gold And Silver – At Significant Support. New “Story” Developing - 28th May 16
The Next Systemic Lehman Event - New Scheiss Dollar & Gold Trade Standard - 27th May 16
Energy and Debt Crisis Point to Much Higher Silver, Metals Prices - 27th May 16
Gold Junior Stocks Q1 2016 Fundamentals - 27th May 16
These Crisis Markets Are Primed to Deliver Big Gains, Platinum Never Cheaper! - 27th May 16
Operation Black Vote BrExit Warning for the Wrong EU Referendum - 27th May 16
UK Immigration Crisis Hits New Extreme, Catastrophic ONS Migration Stats Ahead of EU Referendum - 27th May 16
Many of the World’s Best Investors Made Their Fortunes This Way…And You Can Too - 27th May 16
The Ugly Truth About Stock Market Manipulation and Gold Prices - 27th May 16
Gold Price Looking Vulnerable While Gold Stocks Correct - 27th May 16
The 5 Fatal Flaws of Trading - 27th May 16
The Next Big Crash Of The U.S. Economy Is Coming, Here’s Why - 27th May 16
A New Golden Bull or Has the Market Gone Too Far Too Fast? - 27th May 16
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Gold in Doesn't-Beat-Stocks Shocker!

Commodities / Gold and Silver 2012 Dec 22, 2012 - 03:50 AM GMT

By: Adrian_Ash

Commodities

Gold in 2012 is set to underperform the US stock market for the first time since 2004...

SO the WORLD DIDN'T END on the shortest day of 2012, as forecast by no-one beyond lazy journalists and internet frauds.



But the long bull market gold has choked its last. Or so some soothsayers claim.

Bloomberg: "Gold, [enjoying] its longest winning streak in at least nine decades, is poised to enter a bear market..."

Interactive Investor: "Is gold's bull market over? Market commentators [are] citing a tumultuous economic environment. Others say it has simply been over-bought, and as with each bull market, inevitably reach[ed] a point of resistance..."

MarketWatch: "Gold bugs are finally throwing in the towel. Over the last two weeks [they] have become even more discouraged than they were at the end of November. And that’s saying something..."

Okay, we were kidding. These 3 stories in fact came at the end of 2011. But with the big top of summer last year now a distant memory, and with prices this week unwinding all of 2012's gains for Euro and Sterling investors, you could book your path to the US Treasury, running Italy, or getting a $400,000 annual housing allowance from the Bank of England by saying gold is spent today.

"Goldman Sachs...are among those calling the end of the gold bull market," reports Portfolio Adviser, "having recently trimmed their 2013 forecasts to $1800/oz."

Whatever the reality ahead, gold has certainly done an odd thing in 2012. Odd for the last 13 years at least. Because it failed to beat the US stock market's annual gain – the first such failing since 2004, and only the third time since 1999.


What to make of this underperformance? Well, if you missed all of that 14.8% capital gain in the S&P500, then a measly 7.9% return on your gold might be scant comfort. But it does continue a broader trend, dating back a whole decade.
 
Gold and the stock market both rose together this year. Only twice has that failed in the last decade, once when stocks sank (2008), and once when they were flat (2011).


 
What gives? Isn't gold supposed to rise when stock markets plunge, and vice versa? But really, that's such a 20th century idea!


 
Go back 20 years, and flip the price of gold upside down. As US stocks rose, the gold price fell, all through the mid-to-late '90s. It wasn't early 2001 that gold found its floor – shown as the second peak on our inverted chart.

And from there, the Tech Stock Crash came right alongside the start of gold's now 12-year rise...a rise which stocks joined again just as soon as near-zero interest rates were applied in 2003.

Yes, the common link we believe has been cheap money. On the one hand it has driven investors back into stocks (and back again thanks to truly free cash and quantitative easing since 2009). On the other, it has driven a small but growing band of people worldwide to abandon a chunk of their cash, swapping it for a lump of metal instead. And overall, gold has outperformed by not sinking in the middle.

Scarce and incorruptible, unlike common stock, gold has thus acted as a great hedge for stock market bulls, rising both with and despite the action in equities. But being rare and indestructible, gold has yet to find its true calling in the early 21st century we predict, squinting into the future just like ancient Mayans didn't.

We think gold looks good insurance against that other all-rising bull market, the all-inflating credit bubble that is the 32-year non-stop bull market in US and other Western government bonds.

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.

Adrian Ash Archive

© 2005-2016 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

Catching a Falling Financial Knife