Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

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

© 2005-2018 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