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 18, 2013 4:35PM
avatar
If the "thrill" of gold is so gone, then tell me why Germany is repatriating their gold in the New York Federal Reserve bank back to Germany? Have things reached a point where Central Banks don't trust each other?
Jan 18, 2013 4:33PM
avatar
Only the drug thugs are wearing it and killing each other for it, so who'd want to wear it anymore?
Jan 18, 2013 4:27PM
avatar
Food and water will be the fiat in the future world. You can't survive by eating gold. But you can survive on food and water.
Jan 18, 2013 4:23PM
avatar
Do all what you want with the stocks and metals.  We are only measured by time, now.  It is simple buyer and seller and with no confidence in any type of recovery anywhere other than contrived. Listen to all the hype you want..it is just BS and will continue.  Inflation is here and will run rampant. The dollar is history and will become lesser and lesser if there is any valuation now in real money in real time.  The metals are a survival drop back technique and just more BS as they are hand in hand now and not remotely reasonable to buy for any layman.  This has been coming for a long time.  You will see a barter system..yeah, laugh...it is coming.  We will get away from the this world-wide encompassment that we have allowed our nation to be part of. 
Jan 18, 2013 4:13PM
avatar
I only insist on gold for my TEETH.

Silver fillings BAD.

Jan 18, 2013 4:10PM
avatar
There seems to be a lot of talk about gold being a "lost cause",or the commodity of  "doomsday preppers"..but in actuality,gold has appreciated steadily for decades. I only wish I had seen the light decades ago.  
 I am willing to bet in ten years,gold purchased today will be worth a lot more than the dollar bills used to purchase that gold,with a lot less risk than the stock market or bonds. We shall see..
Jan 18, 2013 4:03PM
avatar
I'd really like to read the article with out the innoring voice over and commercial1 Pisses me off. Are you listening Fidelity?
Jan 18, 2013 3:54PM
avatar
Max S....I've wondered for a long time, if they served K-Y jelly with that Corndog...??
Jan 18, 2013 3:52PM
avatar
If you think that was all Bush's fault....That's good enough for me.
Jan 18, 2013 3:51PM
avatar

If the Market ends about flat today....It will be a great week.

And we can take a break for about 3 days.....And ponder.

Jan 18, 2013 3:49PM
avatar

really?? meanwhile in the "of-course-this-prick-would-do-that" files: get a load of this:

 

 Former New Orleans Mayor Ray Nagin was indicted Friday on charges that he used his office for personal gain, accepting payoffs, free trips and gratuities from contractors while the city was struggling to recover from the devastation of Hurricane Katrina, and takin' 60k worth of bribes here, there, everywhere,

 

oh my??!!! did George BUsh make him do that!!! I'm sure it's somehow Bush's fault!!! I mean who caused the hurricane called Katrina!! Bush did!! so naturally with all that trauma this bastard prick nagin had no choice but to be a corrupt motherfckr while "his" people that he claimed to "help" and be soooooo concerned for are still treadin' water, that's what you get with democraps!!! filthy, lying corrupt, race baiting hypocritical sons of whores, plain and simple, if there's a black guy in office, corruption GUARANTEED!! I mean they're ENTITLED to white peoples money, taxpayers money, but the WHITE is always implied, truth is truth' nuff said.

 

wait not just yet, funny how the more osama talks gun control aka 2nd amendment abolition, the more people are racing to the guns stores, buying guns for 2wice what they're worth in some places, keep talkin osama you filthy marxist pig, keep talkin.

Jan 18, 2013 3:43PM
avatar
The funny thing is, the value of Gold is determined by how many paper dollars it's worth. Gold or paper it's all the same, the fiat system is here to stay. Welcome to " The Grand Illusion "
Jan 18, 2013 3:38PM
avatar

Buy or own Gold and Silver makes no difference to me...

 

But just talking about it has never made or loss anyone a dime. 

Jan 18, 2013 3:31PM
avatar
That's EXACTLY what I was hoping you FOOLS would think. That way I can buy more!
Jan 18, 2013 2:58PM
avatar

Not being a bullion buyer in Gold nor Silver...Except jewelry items and a few coins...

 

We have been stagnating along the 1700 line for several months and I'm expecting a break out..in the near term of 4-7 months...Feds and World will help lead the way, maybe back to the 19s ??

If you have manage to pick up or buy on the cheap in recent past...We should make a few bucks.

 

Investments in Miners have served us well over the 7-8 years, and those profits on sales can help build a better portfolio of dividend producers...

Holding for the highest price never paid as much...But the Equities have to be traded 2-3 times a year or when comfortable with the gain..

Jan 18, 2013 2:51PM
avatar
Gold was up 6% last year and predictions are 5% this year; not bad!  In 10-20 years the gold coin will be worth more than any currency will be so, where do you put your savings?  Or, you could buy artwork, real estate, antiques....anything but any paper money.  Not that hard to understand but you need to be diversified.
Jan 18, 2013 2:51PM
avatar
DDDOOGG:I vote for the best person reguardless of party.Unlike you who vote straight GOP.
Jan 18, 2013 2:47PM
avatar
Gold is great if you want to bury it out in the back yard and store your current wealth.   Way better than a savings account in dollars.

Sadly it will never make you wealthy being only a currency and unit of exchange.     Why the TV guys love selling it collecting broker fees from suckers.



Jan 18, 2013 2:23PM
avatar
I'd rather have barbaric metals (silver/gold)  in hand than fantasy created fiat any day. Silver/gold  have a 5000+ year history of being a medium of exhange. How many years does fiat have to its credit? Hold 20 ounces of silver bullion in hand compared to a piece of linen paper with picture of a dead president  that is nothing more than a promise.....yeah..promises...promises..
Jan 18, 2013 1:53PM
avatar
More BULL "S" from the Financial Experts ?   ! The thrill is gone how quaint !   Buy Gold ! Buy Gold !   This  is a rigged market ! TAKE YOUR MONEY AND RUN !
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.