Gold News

Polka-Dots, Jeggings and $350 Gold

They seek him here, seek him there. His clothes are loud, but never square...
 
"GOLD," reckons French investment and bullion bank Societe Generale, "is out of fashion like flared trousers," writes Adrian Ash at BullionVault.
 
Funny. Because I've been trying to find a pair of trousers with a slight flare – anything, in fact, to escape the tyranny of 'jeggings' now ruling fashion for five years or more.
 
But no luck. My modest aim of keeping the blood flowing in my legs by avoiding bone-tight drainpipes seems as passé, as outdated, as buying gold. And when it comes to gold in 2015, as SocGen concludes, "No one wants it." 
 
Nice soundbite, but not quite true. BullionVault users continue to buy as they have throughout 2015 to date, and they plan to buy more according to this week's survey of our Daily Update readers.
 
European coin and small-bar sales meantime remain strong on the latest analysis from consultancy Thomson Reuters GFMS, while larger US investors have returned in force these last two months based on our own data here at BullionVault. Premiums on gold delivered into China suggest demand is turning higher in the world's No.1 consumer nation, despite the summer shutdown in households purchases.
 
No matter. Rubbishing gold is now all the rage. It's so hip to be down on gold, in fact, that this week's headline-grabbing call for gold below $400 has already been out-done.
 
" Get ready for $350 gold," says a MarketWatch headline, quoting an academic who apparently forecast the plunge in prices back in 2012. 
 
Only, he didn't. Read the paper which MarketWatch cites, and what the 2012 research actually said was that gold might go down. Or it might go up.
 
A proper two-handed economist then...right up until the downtrend in gold has already lopped 40% off the price...and calling it lower becomes all the rage.
 
How very fashionable. As for SocGen's flared trousers...
22 August 2011 (gold $1877, up 17% in 1 month, up 201% in 5 years)
"We believe political/economic policy inertia with regard to debt management is likely to continue to drive physical and paper appetite into 2012/13...We expect levels of over $2000 per ounce to be achieved before year-end."
 
12 Sept 2011 (now $1834, down 4.5% in 1 week from $1920 peak)
"Buy gold on dips...likely to reach fresh all-time record highs before year-end."
 
11 Sept 2012 (down 10% in 12 months to $1736; ETF holdings set new records) 
"We remain bullish all precious metals and gold remains the safe choice..."
 
19 Dec 2012 (slips to $1665, middle of 2011/12 range; ETFs set new records)
"Gold – a buying opportunity."
 
20 March 2013 (gold $1607, down 16% from peak 18 months earlier; ETFs shrinking)
"Short gold rallies as bubble is in the process of deflating."
 
19 July 2013 (now $1295, up 9% from end-June's crash low; won't set another new low until Nov. 2014; about to rally another 10%)
"The rebound developing since $1180 looks corrective...H&S [pattern] forming...down trend is to resume soon."
Unfair? Maybe. A random selection most certainly, and all from a huge organization with many differing views and analysts.
 
But the point isn't that SocGen called gold wrong at the top, nor that it called the 2013 gold crash a good three weeks in advance, providing a very smart tip when its trading clients needed it most. The point is that investment banks, and the headline stories which their analysts help fill, tend to reflect what has become fashionable, rather than setting the pace or changing tastes.
 
That great tip in March 2013 to sell gold, for instance, came before Goldman Sachs said the same, but after Credit Suisse announced what it called the end of the era of gold. By the time that crash found its floor at end-June, the entire industry was bearish. How could it not be?
 
Of course, the current bearishness sounds like a screaming buy signal to some mining-stock tipsters and fund managers. But as investment legend Warren Buffet said in 2011 – trying to dismiss the bull market in gold which he'd so famously ignored for more than 10 years – "As 'bandwagon' investors join any party, they create their own truth, for a while."
 
The bandwagon in gold is now rolling ever-more bearish. That could prove self-fulfulling for a while longer yet. Right up until it's no longer true.
 
Longer-term investors holding a little gold as insurance meantime won't care much either way. Style never goes out of fashion.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are 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. Please review our Terms & Conditions for accessing Gold News.

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