Gold: The thrill is gone, and so is the story

Metal pros expect moderate gains this year, but certainly no renewed rush for this precious metal.

By Minyanville.com Jan 18, 2013 10:27AM
Gold Bars Stockbyte SuperStockAmong the big financial questions commonly posed for 2013 is whether the 12-year bull market in gold will finally come to an end. Actually, it has. Gold prices peaked in the summer of 2011 and have been going sideways since October of that year -- 15 months of breakeven.

Metal pros expect moderate gains this year, but certainly no renewed gold rush. The 23 traders and pundits polled annually by the London Bullion Market Association came up with an average 2013 gold price of $1,753 an ounce, about 5% higher than current levels. Three analysts identified by Bloomberg as the most accurate on gold in the past were still more conservative, expecting prices between $1,700 and $1,740 an ounce. The LBMA wisemen and women predict gold to be outperformed by all of its lowly precious metal cousins: silver, platinum and palladium.

Worse for gold bugs than petering momentum is the fog that has descended over the traditional, and still constantly repeated, rationale for stocking up on the ancient metal.

Gold is supposed to be the ultimate grumpy person's investment, turned to when the world is going to hell in a handbasket and paper money can no longer be trusted. Despite the rage for exchange-traded products like the SPDR Gold Shares Fund (GLD), 90% of speculative purchases still come in the form of gold bars or coins, stashed in a safe place in case humanity loses faith in more newfangled stores of value, according to Nick Brooks, research director at London-based ETF Securities.

Gold performed according to this script for decades. It soared in the malaise-ridden 1970s, crashed and went moribund in the optimistic '80s and '90s, came roaring back to life after the tech/telecom crash and Sept. 11, 2001. But a funny thing happened to gold prices in 2008: They plummeted like almost every other financial asset in the world. Gold futures dropped 25% between July and October of that fearful year, a similar trajectory to stocks as measured by the S&P 500 ($INX).

Gold rebounded from the crisis earlier and more dramatically than equities, and the world never has a problem explaining rampant success. But since the metal stalled 18 months ago, advocates have been increasingly strained to fit the old justifications for buying to new circumstances. The world has certainly not been short of alarming economic news since mid-2011, nor evidence that its major paper currencies are being "debased," to quote a favorite gold bug term. Plenty of reasons out there to put your remaining savings in metal bars and batten down the hatches.

Yet a helpful chart from ETF securities matching 2011-2012 gold movements to news events shows an erratic pattern. Gold prices sometimes rise when they logically should, as they did after Standard & Poor's downgraded U.S. sovereign credit in September 2011. But sometimes they don't, as when the Federal Reserve announced the "debasing" QE3 (third round quantitative easing) program a year later. Gold fell, as you would expect, after a Greek government bailout deal in March 2012. It also fell, as you would not expect, after the European Central Bank released 489 billion printing-press euros through its Long-Term Refinancing Operation four months earlier.
gold and events chartSo all debasements and crises are not created equal as far as gold is concerned. The metal's price shows a more reliable, negative correlation with the value of the dollar, falling as the U.S. currency rises against the euro, and vice versa. But not entirely reliable. The euro has been on a tear lately, gaining 5% against the greenback since mid-November; gold prices have slumped anyway.

The new truth about gold is hiding in plain sight. The time-honored pessimists' choice has become one of more "risk-on" asset in the post-2008 environment. Gold prices have rallied and dipped roughly in lockstep with stocks, as money peeks out from behind the broad skirts of the U.S. Treasury, or skitters back again in apprehension. Again, the last two months have been a notable exception, gold dropping even as the S&P 500 had a 9% runup.

If you want an optimistic bet on today's market, you probably have better options -- starting with platinum, palladium and silver, all of them more beaten down in recent years and more geared to industrial recovery. The LBMA traders' pick for 2013 is silver, slated for a 9% rise over current levels.

Gold could presumably reassert its historic safe-haven role if epic failure by the U.S. Congress overturns the post-2008 order, triggering a default that finally shakes confidence in Treasury bonds and leaves trillions of dollars with nowhere to hide. But in that case the best investment might be canned food and a gun.

More from Minyanville
Tags: GLDgold
76Comments
Jan 19, 2013 2:20PM
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That pretty much;...SUMS it up, Synergy Green.....Much of the rest of this, is a lot of blow...
Jan 19, 2013 2:11PM
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Royal, I know you were drinking/sipping and then you became, Flush..lol too.
Jan 19, 2013 1:24PM
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"Gold is the currency of Kings, Silver the currency of Gentlemen... Barter is the currency of peasants, and debt the currency of Slaves!" - Norm Franz "Money and Wealth in the New Millennium"
Jan 19, 2013 1:06AM
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Gold is attractive in controlling uncertainty, the financial flavors that we have are the Libor scandal and don't forget the Devil's Derivatives. Oh, don't forget the debt that we can't pay......so roll the dice and hold on to your small dings. I will keep my gold. Women do hate uncertainty and small dings. LOL  
Jan 19, 2013 12:42AM
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Hoarding gold is for women. Or men that can't attract women or attention.
Jan 18, 2013 9:06PM
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If you bought gold for a thrill, you bought it for the wrong reason anyway.
Jan 18, 2013 8:29PM
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This is nothing but another hack piece on Gold & Silver. MSN Money is clearly part of the propaganda machine trying to hold back the price of Gold and Silver to disguise the rampant devaluation of the dollar. The fact is that the Fed is wantonly printing money out of thin air and that Gold and Silver are THE best hedge to the eventual collapse of the dollar as a result of the "QE to Infinity" insanity. MSN Money desperately needs to take a class in Economics 101 Dollar Distruction... err Devaluation. Then again, I'm sure they're already knowledable and that they know exactly what they're doing in pushing this agenda!!!!!
Jan 18, 2013 8:09PM
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I would say the last sentence in the article about sums it up, get yours while you can with Chavez's bro in the house.
Jan 18, 2013 6:40PM
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When people talk about gold they rarely understand each other. It is like talking about apples and oranges. Over the last 100 years gold has appreciated about 3 % annually. The fed desires the dollar to depreciate by 2 to 3 %. Who trusts the fed to be right? The answer is if you can make more than 3% and require liquidity put less in gold. Buying gold is for the long term holders who are risk averse.
Jan 18, 2013 6:40PM
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This must be a gold/silver shorter (maybe JP Morgan) writing this trying to cover their butts! I have been buying the precious metals since gold was $250 back in the late 90's and I continue to buy because they are both still very cheap (for at least another 5-10 years). You nay Sayers just stay out of this market and let us with understanding and discernment have more to be able to purchase. A short history on fiat currency...the Confederate dollar...but many are still spending time and money to find the hidden Confederate gold!

Jagger an
Jan 18, 2013 6:33PM
Jan 18, 2013 5:44PM
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There is a funny story being bandied about regarding what coins and precious metals are worth.  It goes like this "a man puts 2 old silver dimes on the counter and says in 1963 I could buy 1 gallon of gas with these, in 2013 I can buy 1 gallon of gas and get change back using the same old silver dimes".  Do that with your paper fiat money.  People in India and China are buying silver and gold as it becomes available.  These people know what fiat currency is.  Over history paper money becomes toilet paper, but precious metals stand the test of time. 
Jan 18, 2013 5:31PM
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Sovereign states are hoarding gold reserves while statist lemmings are left holding worthless paper
Jan 18, 2013 5:14PM
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The German Bundsbank is busy gathering all its gold under one one roof in the fatherland as we speak.  Seems that cooler heads have decided having it scattered around is not such a good idea any more? 
Jan 18, 2013 5:09PM
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Do any of the talking heads who write these bs articles ever get outside the office and actually walk around and talk to people and look at factual information?  From the gist of the articles I have extreme doubts.  For over four decades I have done income tax work; in the course of a tax year I do over one thousand tax returns and talk to many people about money, money, money, on a daily basis.  On a weekly basis I discuss the purchase of precious metals as protection against inflation and economic disaster; and how best to do so.  Reality has many people very nervous; and, busy preparing for the rainy day.  Any more it is not a question of "if" but rather of "when".  And the "when" is going to be "sooner" rather than "later".  Simple advice of the day is to buy silver as it will ratchet up to the two hundred dollar an ounce range by years end; gold will ratchet up also but will be outperformed by silver.   
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Until the deficit starts heading sideways, I'll hold the gold/silver that might be going sideways as well, thank you. Besides, we have another 4 years of pure nonsense, another possible downgrade, (more likely than not) , and what the media is now calling "coping " in front of all of us.
Jan 18, 2013 4:58PM
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Gold is prettier then a Proton....And it's shiny too..
Jan 18, 2013 4:55PM
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Gold  is in a bubble. It's all hype and superstition left over from ancient times. It's nothing but a stupid element that is made up of the same old tired protons, neutrons and electrons of which every element is comprised. People can be so gullible. Many can be sold absolutely anything. Look at timeshares, cigarettes, overpriced real estate... amazing.
Jan 18, 2013 4:48PM
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Well don't think they can takeaway the small gain on the DOW today....

It's been a Great Week....For anyone invested.

 

STANDStoReason.....I think you need a different Mutual Fund, or Fund Manager ?? Check his credentials out....But that's just my opinion.

 

Gold at about 1685 per troy, down a couple bucks. Look for $1700 next week, my guess.

Silver at near 31.85 up a little.

Oil hanging around the 95.50 mark..

HAVE A NICE WEEKEND....You have that Holiday coming,thank you Barry or Martin.?

Jan 18, 2013 4:39PM
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It funny how they say the market recovered, but none of the little guys' portfolios did recover.  None of my mutual funds ever came back to what they were.  The stock market is not for the little investors any more.  They are all trading on inside information, and they only stick some little person out once in a while to prosecute like Martha Stewart and later we find out that all of our elected officials have been doing it the whole time.  How could any small investor make any money when the Armed Services Commission could use all the information on who was getting contracts and the committee on foreign relations would be passing info to their friends.  Why wasn't this public knowledge that our elected  officials were doing this?  T^he well is dry for all these brokers to make money off the little guys now because they already have taken all of our money.  Now they are trying to steal more.  Don't buy into it.
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