ANALYSIS of what it calls the "Longest Pictures" in world finance by Bank of America-Merrill Lynch recommends that contrarian investors don't Buy Gold but sell it in favor of European and Japanese assets today.

"The Longest Pictures illustrate long-run trends in financial markets," says Michael Hartnett, chief global equity strategist, in the 100-page report. It plots nearly 100 charts showing asset prices and returns, correlations, volatility and other factors for Western, Japanese and emerging markets worldwide.

The longest chart maps Dutch government bond yields since 1517. The report also quotes a raft of proverbs and soundbites urging investors to "be fearful when others are greedy and to be greedy only when others are fearful" (Warren Buffett) and to "Buy on the cannons, sell on the trumpets" (old French saying).

"Secular trends in bonds, equities and other asset classes allow us to advise what the long-term contrarian investor should do," says Hartnett. "We believe a secular contrarian should be buying Equities, European assets, Japan and Financial & Telecom stocks and selling Gold, Bonds, Emerging Markets and Resources & Consumer Staples stocks."

In particular, European equities are currently the cheapest they have been since the 1920s, says Bank of America-Merrill Lynch. That analysis is based on May 2012's record-high for the spread of European stock-market dividends over and above the yield offered by 10-year German Bunds – a record brought about by record-low bond yields, rather than high nominal equity dividends.

As for investors deciding whether to Buy Gold, "Today zero interest rate policies across the G7 are fueling another bull market in gold," the bank's analysis concedes.

"The past five years gold prices have soared from $600/oz to as high as $1900/oz in September 2011."

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