Best of the Week
Most Popular
1.London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - Nadeem_Walayat
2. Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - Michael_Noonan
3.Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - Nadeem_Walayat
4.Glaring Q.E. Failure Spotted - Money Velocity Is Falling Rapidly - Jim_Willie_CB
5.Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - Keith Markey
6.Gold Prices 2014: Do What Goldman Does, Not What It Says - David Zeiler
7.Bitcoin Price Strong Appreciation to Be Followed by Declines? - Mike_McAra
8.Gold Preparing to Launch as U.S. Dollar Drops to Key Support - Jason_Hamlin
9.Doctor Doom on the Fiat Money Empire Coming Financial Crisis - Andrew_McKillop
10.The Real Purpose Of QE - It’s Not Employment - Darryl_R_Schoon
Last 72 Hrs
Stock Market Bears Wrong Again, Apple to Push Dow to New All time High - 24th Apr 14
Gold Prepared for the Attack of the Short Sellers - 24th Apr 14
Weak U.S. Housing Data Supports Euro - 24th Apr 14
Killing the Maximum-Wage Myth - 23rd Apr 14
U.S. Quarterly Economic Review - Optimism at the Fed - 23rd Apr 14
Why Mohamed El-Erian Left Pimco - Video - 23rd Apr 14
QE Is A Fraud Perpetrated By Made Men - 23rd Apr 14
Gold and Miners Outperform Once Again - 23rd Apr 14
G-20 and the US Tell the Bank of Japan to End Quantitative Easing - 23rd Apr 14
How to Get in the Trading Game and Profit - 23rd Apr 14
Fed Follies, U.S. Housing Market Fiasco - 23rd Apr 14
What Will December 31, 2014 Financial Headlines Look Like? - 23rd Apr 14
Why Gasoline Prices are Surging Again - 22nd Apr 14
Cold War 2.0 - 22nd Apr 14
The JIS – Junk Ideology Syndrome - 22nd Apr 14
How to Avoid Losing All Your Money - 22nd Apr 14
Silver Up, Stocks S&P Down - 22nd Apr 14
U.S. Mainstream Media Propaganda Setting the Stage for War With Pakistan - 22nd Apr 14
U.S. Interest Rates are NOT Rising! - 22nd Apr 14
A Crisis vs. the REAL Crisis: Keep Your Eye on the Debt Ball - 22nd Apr 14
Bitcoin Implications of Lack of Price Action - 22nd Apr 14
Japan - The Twilight Of The Rising Sun - 22nd Apr 14
Is This What a Credit Bubble Looks Like? - 22nd Apr 14
The Dark Side Of The Silver Mining Industry - 21st Apr 14
Strong U.S. Dollar Rally Could Pull Rug From Under Gold and Silver - 21st Apr 14
Silver Feeble Rally Fails to Hold Breakout, Falling Back Towards Support - 21st Apr 14
Stock Market Smart Money – All Out or More to Go? - 21st Apr 14
Fast Rising Pump Prices Counterattack - 21st Apr 14
Extreme Climate Change And Life On This Planet - 21st Apr 14
Gold and Silver Stocks Sitting Tight - 21st Apr 14
Stock Market Minor Correction Imminent - 21st Apr 14
Gold and Silver - Counting Blessings and Tender Mercies - 20th Apr 14 - Jesse
The CIA Through The Looking-Glass - 20th Apr 14 - Stephen_Merrill
Gold And Silver - Gann, Cardinal Grand Cross, A Mousetrap, And Wrong Expectations - 20th Apr 14 - Michael Noonan
Nikkei Stock Market - Sell Japan - 20th Apr 14 - WavePatternTraders

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

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

© 2005-2014 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

Free Report - Financial Markets 2014