Gold is now in a bear market – is it time to sell?

It’s been a terrible few days for gold.

On Friday, the yellow metal collapsed down through the $1,500 an ounce mark. And in this morning’s trading, it fell as far as $1,425 at one point.

The price has now fallen by more than 20% from its September 2011 peak of around $1,920. That means that gold is now in a bear market.

For a while, we’ve been saying that you should hold around 10% of your portfolio in gold as insurance against a wobbly financial system.

So has gold outlived its usefulness? Is it time to ditch your insurance policy?

I don’t think so. Here’s why…

Are Japanese government bonds behind the collapse in gold?

When gold suffers a brutal collapse, the conspiracy theorists rush out of the woodwork, muttering darkly about “price suppression”. Ignore them. It’s not good for the blood pressure and it doesn’t help matters.

A number of factors have hit gold in recent days. For one, sentiment among investment banks has started turning bearish. Société Générale issued a ‘sell’ note on gold recently, while Goldman Sachs went as far as to recommend shorting it. Good timing on their part as ever.

But it’s not just gold. Commodities as a whole have been suffering. The oil price has taken a dive over the last couple of sessions. Copper is at an eight-month low. One – slightly technical – theory, cited by the Zero Hedge website, is that this general plunge is linked to the Japanese government’s money-printing plans.

Since the new central bank governor, ‘Helicopter’ Haruhiko Kuroda promised to re-inflate the Japanese economy, Japanese government bonds (JGBs) have been on a wild ride.

If Kuroda is true to his word, then the current miniscule yield on JGBs (around 0.6%) is unjustified. It has to rise (and so bond prices have to fall).

At the same time however, if the central bank is planning to snap up JGBs, then why would you sell them? You’ve got a guaranteed buyer willing to chase prices higher (as has happened in the US and the UK).

So, even as some flee JGBs, others are keen to buy in. And as a result, JGBs have become much more volatile – in other words, the price has fluctuated a lot more than normal.

When the price of an asset becomes more volatile, anyone using borrowed money to invest in them, has to put a bigger deposit (also known as ‘margin’) down. If you’ve ever used spread betting, you’ll know how this works.

If you haven’t, the ‘margin’ is there so that if your bet moves into a losing position, the person who loaned you the money to speculate won’t be out of pocket. It’s just like a bank asking you to put a 20% deposit down on a property. The deposit protects the bank if prices fall.

So, anyone holding JGBs is being asked to put up a bigger margin to do so. That means they need to raise the money from somewhere. That ‘somewhere’ includes taking profits on gold and other commodity holdings.

It’s a theory at least. And if you’re looking for something to explain the last couple of days’ sell off, it’s one of the more interesting ones.

Gold as a measure of faith

But I think there’s a better way to explain gold’s recent lacklustre performance.

It’s no coincidence that gold has sold off in the wake of Japan’s promise to “do what it takes” to revive its deflating economy. But it’s not really about the ‘margin calls’. It’s about faith in central banks.

We’ve always seen gold as a form of insurance against financial calamity. At the start of this century, that insurance was cheap, because everyone believed that nothing could go wrong. After all, Alan Greenspan, the ‘Maestro’, was in charge of the Federal Reserve, and by extension, global investment markets.

Gold’s rise coincided with investors gradually losing faith in the ability of central banks to keep a lid on inflation and the credit bubble. And when the financial system froze up in 2008, gold was among the first assets to bounce back.

But since then, investors have been well-trained by the Federal Reserve, and to a lesser extent, the Bank of England. When a central bank prints money, the price of stocks goes up. You don’t need to worry about anything else. Just buy shares and the central banks will take care of the rest.

So what’s really hurt gold is the return of faith in central bankers. Think about it. When gold hit a peak in September 2011, that was just before Mario Draghi took charge at the European Central Bank.

He was taking over from Jean-Claude Trichet, a man who had entirely lost the confidence of investors. Since then, Draghi has promised to “do what it takes” to save the euro. He’s seen as a safe, market-friendly pair of hands.

And now even the Bank of Japan has seen the light. So why would you hold on to gold? The central bankers have it covered. Everything’s going to be fine. So get out of boring, old gold and go buy some riskier assets.

Why you should still be insuring against financial disaster

We’ve been saying for some time that you should treat gold as insurance, and have no more than 10% of your portfolio invested in the metal. So is it still worth hanging on to this insurance?

I can see gold going lower from here. I’m no technical analyst, but you don’t have to be to look at the gold price chart and say: “That’s ugly.”

However, the answer has to be “yes – I’m holding on to gold”. Here’s why.

I’m happy to have money invested in equity markets just now. In terms of exposure to general markets, I’d hold Japanese and eurozone funds or trackers. I think they’re cheap, and they’ll keep going up.

In developed markets like the US and UK, I feel the overall indices are expensive (in the US) or imbalanced (the UK). I’d prefer a portfolio of individual stocks that pay an income and give exposure to the US dollar.

In any case, I think it’s a good idea to have your money invested in markets rather than sitting under your bed.

But would I feel comfortable having a portfolio without any gold in it? No.

Central bankers might have won back the confidence of investors for now. The central bank ‘put’  – where investors bet that central banks will bail them out, no matter what – is being wedged back in place. Central banks may even have won the war on deflation.

But make no mistake, current monetary conditions are unprecedented. Interest rates have never been this low. The Bank of England owns about a third of all outstanding UK government debt. The Federal Reserve holds about 10% of US debt.

How does all of this unwind? I don’t know. No one does. But I can imagine it might get messy. Just look at the JGB market: despite Bank of Japan assurances, it’s acting like a bucking bronco just now, which just shows that central banks can’t control everything.

In short, I’m happy to ride markets higher via the stocks and indices we’ve been endlessly suggesting over the past few years. But I also want to be holding some gold, just to be on the safe side. We’ll be looking at the yellow metal in more detail in the next issue of MoneyWeek magazine, out on Friday.

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  • Robert

    I didn’t see the advert for the $2500 prediction by your expert Mr Popple in today’s email, any reason why??!

    I’m sorry but Moneyweek’s predictions seem very much based on the events of the previous 7 days, I don’t think you have a clue what gold is going to do to frankly!

  • JL

    Can you at Moneyweek not admit that you’ve been wrong about gold for a long time, until today when you seem to have finally realised how gold is viewed?

  • Crazy Tony

    But it has not been bought for safety or “insurance”, but for speculation. The best thing to happen to gold, is if the speculators are shaken out and it falls sharply.

    It spent decades at around $400 per oz, which is probably nearer fair value than the current price.

  • Seb Miller

    I thought that Cyprus was also playing a part in this…. Didn’t I read that they were being forced to sell their gold reserves? And that this might set a precident for other governments (Italy / Spain / France)flooding market as they cover their own debts.

    Anyway, I’m treating this as a ‘buy opportunity’ once the price levels out…. long term i agree with the higher prospects for gold. But seriously – that could be 5+ years away!

  • Peter

    Gold and silver conspiracy theories ???? Are you kidding/ It is so obvious even you lot should be able to see what is going on. I am not in the slightest a gold or siver bug but please spare me the fair and market driven comments. It is bull— and that will be the undoing of all of us !!! WE are no longer capitalists but dance to the bankers every whim. You do not think that maybe Goldman Sachs had a little prior information and were part of the collusion to smash gold ??

  • casandra

    Nice LT buying opportunity. I hope it goes down to $ 1,000 /oz and i’ll pile in for the long run.

  • JGH

    Usually MoneyWeek articles are clear: whether or not I agree with them I can at least understand the argument you are making. But this article seems to boil down to “I expect gold prices to go lower but I’m holding gold because I wouldn’t feel comfortable without it”. Which doesn’t come across as a particularly persusasive argument.

    I’m not saying that your conclusion is wrong, merely that the case you put forward is unconvincing. However, if you can’t come up with better reasons than “it feels comfortable” then maybe its time to really examine whether your case stacks up. Or, as a holder of gold, are you looking for confirmation that you are still doing the right thing ?

  • Peter

    I think MoneyWeek have it right that gold is Insurance for the monetary system imploding.

    This is a good opportunity to buy the insurance at a discount.

    The system will implode is just a matter of when.

  • Crickyster

    The time to sell was about 6 months ago, when all the big boys were dropping it, will continue down from here

  • IJ

    Gold is a highly speculative, a risk asset par excellence that yields nothing and is nigh on impossible to value. Anybody who calls it insurance, a store of value and such like ignores the gigantic problem of human intermediation – the prospect that lots of people buying something might just lead to that thing becoming grossly overvalued. How can a store of value have such wild price swings: 10% in a matter of 2 days? Gold’s only use right now might be that it’s warning of deflationary winds in the global economy. Still, i just put a long spread bet on gold, purely speculatively of course.

  • flyfly

    Its bounced $30 in the last few minutes John, so everything is ok.

    Seriously, you can’t tout something as insurance and then trade it based on short term price fluctuations. If it is insurance, then does the risk that it insures against still exist? If yes, then it is still sensible to have gold.

    If you don’t consider gold as insurance but as a trading security then obviously the drivers are different.

  • Neil

    So is the MW target of GBP1,600 by end of 2013 no longer proposed? I think this was put forward by you only last month.

  • Hugh

    What amazes me is that everytime Gold encounters a selling frenzy, out of the woodwork come the anti-gold gang with venom in their tirades remindng everyone that its just a shiny metal, no intrinsic value yada yada. By the same metric A 500 euro bill is ‘just a piece a paper’. If Gold is not considered unprintable money then why are central banks now huge net buyers? Someone is taking the long side of the bloodbath I think its deep pockets that doing so.

  • Orb

    The central banks falling over themselves to ‘print paper notes’ in a desperate attempt to fill the void left by greedy, reckless, bankrupt banksters as they expanded the money supply through unchecked and thus unprecedented credit expansion must surely end in unprecedented inflation.

    Rather than acting in the interests of the majority by letting these ultimate symbols of capitalist exploitation fail for their irresponsible behaviour while jailing the fraudsters who worked them, they have chosen rather to freeze/cripple whole economies at the cost of the masses – not least of all savers!

    How can gold possibly cling to a ‘fair value’ of $400 in a world absent of the gold standard?

    It’s a matter of time; if you’re a collector of gold insurance, this is a GREAT opportunity, even if the price returns to $12xx.

  • Tweedledee

    I don’t quite understand the negative comments: You can do very nicely from MW’s gold recommendations – all you need to do is invest in the exact opposite happening.

    Admittedly the message above was not entirely transparent, but this has been a magnificent strategy for the past 18 months or so with Dominic Frisby’s predictions.

  • NVP

    Hey guys

    does this mean you’ve finally stopped trying to tell us to buy gold ?…….

    glad I tell my Crew to trade what they see or I would have lost Shedloads in the last few months

    NVP

  • NVP

    Heres a little tip…..

    When markets rise – Buy them……and when markets fall – Sell them

    Thats it – no gurus , no analysts , no secret 100 year systems just released from the vaults …no BIG Dogs ……(no little dogs either) …..and no Big boys either hiding the truth from us all……

    but dont worry…. i’ll still buy money week …….its a fun read

    NVP

  • JC.

    Fantastic buying opportunity in Gold around these levels!!

    Although I think we may shortly have the opposite correlation in as much as it will be japanese bond declines driving the price up as opposed to down!!!

    Simply put …..

    Short the yen buy gold go to sleep!!!!!

  • KMB

    It is a sign of Money Weeks failure that it’s no longer gold hyper activist Mr Frisby of Money Week writes this article but John Stepek himself. Money Week has utterly miscalculated gold’s development for 19 months now, too long for an ‘authoritative paper’. Can you not come to terms and just admit total failure for once. I have unsubscribed a few months ago and haven’t regretted this yet.

  • SH

    NVP’s got it, ride those waves! Maybe not with your pension though.

    Gold definitely suffering from a return of faith to central bankers. That won’t last, keep your eye on inflation expectations down the curve as that’ll be our canary to pile back in to gold. Until then I expect it to calm down into a sideways to lower drift down. Coupled with steadily disappearing from mainstream press. Until one day, when it comes roaring back…

  • Chester

    Perhaps gold is telling us that Central Bankers do not have deflation under control, and that the process of credit money collapse will continue, irrespective of what they do

    Gold’s price is a function of speculative money, significant emotional baggage, and is forecast to fall below $400. Why? When markets continue their correction, which they will do despite unprecedented money printing, the only safe haven will be a handful of leading currencies held in short term tradeable instruments. Ironically, the USD should prove the best insurance possible against financial collapse, which is what Bernanke has spent trillions trying to avoid

    As Cyprus shows very clearly, fiat currency is the only tradeable medium of exchange when a financial system collapses – everything else is worthless when trying to put food on the table

  • Roger

    Moneyweek has certainly fallen in love with gold over the last couple of years. I have been warning that, but there were so many gold bugs at the time.

    Good lesson: there are no good and bad companies (assets), there are only rightly (wrongly) priced companies (assets).

  • Robin

    The world is inflating…

    That gold is moving contrary to this… Can’t say why, but if we know anything at all about the future, there will be more paper currency in circulation tomorrow than today…

    ergo…. buy gold.

  • Max Stirner

    It is fascinating how irrational masses can behave. Going short Gold means to go long fiat. How can anyone seriously make that trade when central bankers are printing money like there is no tomorrow and have already said that they will not stop doing this. But instead of following fundamental principals of economics, the masses are clinging to the lips of their state priests that they worship so much. Ah well, if you can turn stupidity into money you will be rich because there is no shortish of it. Gold is on sale and I am loving it.

  • dr ray

    Backed the truck up to our local coin dealer this lunchtime and he refused to part with his stock. I know he has stock because I went in Saturday and bought what I could with the cash I had.
    Atkinsons have also stopped or ristricted sales.
    It seems only fiat gold is crashing which makes sense as the financial situation becomes more volatile.
    This seems like just the time when the insurance pays out.

  • fandango

    #25 “It seems only fiat gold is crashing which makes sense as the financial situation becomes more volatile. “

    My thoughts exactly. In fact, I’m a wee bit annoyed I don’t have the spare (soon to be useless) cash available at the moment to buy some more physical metal at these ridiculous prices.

  • john higgins

    No need to worry,the banks didn’t sell any Yellow metal.
    They offloaded 500 tons of paper gold.
    It is all part of their strategy to frighten people away from gold
    and back to worthless paper currency.

  • Ellen

    @5 Peter. I agree with you. GATA think Goldman are naked short selling up to 500 tons last week (no physical gold – all paper) and Andrew Maguire, formerly of Goldman, claims the FED are underwriting the big bank to short gold. This is not capitalism – more of a take down
    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/12_Maguire_-_Over_500_Tons_Of_Paper_Gold_Sold_In_Takedown.html

    However, in the news, Japan embark on unprecedented QE, the EU is confiscating deposit accounts to pay the bills and looking for other ways to confiscate private assets through property, the tories are pumping up the housing market with taxpayers money and have hired Mark Carney to obliterate sterling, the FED make $85bn new debt monthly and China can’t put their housing bubble back in the bottle. All this with in a global ZIRP environment. That’s why they’re hating gold – everythings going great!

  • John

    Thanks for the link Ellen – very interesting.

  • Ellen

    @30 John. You might like to hear Andrew Maguire on spot v futures gold at
    http://www.tfmetalsreport.com/podcast/4531/tfmr-podcast-41-andrew-maguire-discusses-gold-backwardation-and-current-gold-price-tren

    I’ve just read Bill Bonners piece on shaking out the johnny come latelys to load up but I will wait until the dust fully settles before going in again. I am starting to understand why the Germans wanted their gold back from the FED and am wondering if Cyprus ever had any to sell

  • JamJam

    I was following another gentleman writing for Gold about 20 years ago, I believe from Hing Kong. I followed with faith. Gold prices kept on coming down until he was kicked out of that column!! I have commented on Money Week’s passion about Gold few times earlier. I believe one has to know what is Japan and then relate to Japanese acts of Faith. Money Week proved wrong and they will be again.

  • Jimmy O’Goblin

    Jon,
    I’m not sure I would put much faith in central bankers who declare that we are in ‘unchartered waters’ and ‘unsure of the consequences of QE’. However, I did state a while back that I expected gold to fall hard and that, despite politicians talking a good job, I saw nothing but depression in western economies.
    Nothing has changed. The Euro is systematically trashing economies and the Anglo Saxons have more debt than they can possibly repay at par.
    The sharp fall in gold (£894 as I speak) could be the precurser to a mighty stock market crash as QE is halted in the summer this year (as indicated by J. Ferguson).
    Gold will shine when inflation arrives and give the opportunity of the century.
    Regards JOG (the unforgettable experiment is dead. Long live the unforgettable experiment).

  • Boris MacDonut

    Just three weeks ago Dom Frisby told us Gold will hit £1,600 ($2,500) by the end of 2014 and $2,000 this year. It is actually down 20% in 4 months to 0nly $1394.
    I thought folk retreated to Gold in the bad times. Do I surmise the good times are on the way back ? I know Thatcher was unpopular, but really, 9.3% in a day is a big over reaction to the joyful news. Just did a 25 month credit card balance transfer at 1.5%. Stupid not to.

  • MichaelL

    Those funds that had phyical gold, gold shares (trojian springs to mind, and it had a slug of MSFT for good measure) must be taking a pasting today …. does this mean though, that ultimately TIPS and Linkers are the real safe havens…

  • Boris MacDonut

    #32 J O’Goblin. You mean uncharted waters. as in not yet mapped. “Unchartered” would be waters without the legal right to do something like hold a fair.

  • IJ

    @ MichaelL. Indeed there will be a long list of dead bodies and significant tremors across asset classes. Put yourself in the shoes of a”conservative” fund manager who had 10% of their portfolio in gold to “insure” against losses in the rest of the portfolio, as well as a stop loss on the entire portfolio. Then think of just how many portfolios have been constructed in this way. You have a recipe for massive forced liquidation across asset classes. This will lead to some great opportunities but probably a lot further down and NOT necessarily in gold.

  • DavidF

    Wondering allowed – Cyprus to sell 400 tonnes of gold to top up their bailout requirements. Reminds me very much of the time when Gordon Brown gave the markets two weeks notice, in 1999, that he proposed to sell off -guess what – 400 tonnes of UK gold.
    I remember the proposal effectively drove down the price of gold and was said, at the time, to have been implemented to benefit international banks that had taken short positions in the carry trade, which was common at the time.
    The two weeks notice of sale skimmed, I believe from memory, in excess of 10% off the spot price by the time of the first auction of UK gold.
    Many gold traders took advantage of this gift of advance notice and shorted the yellow metal from around Us$300 reaching a low point of US$252.80. We all know what happened to the gold price after that.
    I’m wondering allowed again, are we seeing something similar now with the implied sale of Cyprus gold?

  • dr ray

    DavidF@37
    Your spelling may be suspect but you have a valid point. Traditionally sales of gold have always been on the quiet and only a moron or someone with a Baldrick type cunning plan would announce it in advance.
    It was said that Gordon Brown did it so that Goldman Sachs could close their short positions at a profit because the market had moved against them.
    We always expected a dramatic move towards the end of this financial train crash which would gift physical gold to the bankers. This might be it.

  • JoeA

    Could it be European banks trying to raise cash to cover all of the money that must be haemorrhaging out of them at the moment? Or, after bitcoin was crushed last week, could it be a coordinated attempt by central banks to lower confidence in alternatives and thus leave most people with little alternative but the stock market, buying government bonds or leaving it in the bank account where they can help themselves to it a la Cyprus?

  • DavidF

    dr ray@38
    I’m always willing to learn. Which word do you think has the wrong spelling?

  • Ed

    ever since the bull market in gold started in 2002 there have been big corrections both in 2006 and 2008, what was unusual about the period between 2011 and now was that gold was stuck in a range, this correction was always going to happen. Gold is also very sensitive to technical analysis much more so than any stock is , therefore when it hits certain prices it tends to have either an avalanche of selling or buying. Iread an interview with george soros about gold and his recent selling of gold. He doesn’t think it is about to fall off a cliff, he thinks that if it corrects then the central banks will be buyers, so maybe $1000 -$1200 will be the floor, thats the nature of the beast

  • Ellen

    In order for the strategy of QE to work there has to be a significant, long term, and stout Western economic world recovery that automatically cancels QE via balance sheet repair. This recovery in the western world is a straight line affair, bouncing off a low. It does not look like QE will succeed in the degree the Fed wishes to make their strategy a success of monetary innovation. That innovation was not of tool but size of QE tool. Therefore the clear and unquestionable effort to dim the light of dollar alternatives is to hide dollar weakness.

    The dollar mirage that is trying to be built must be limited in time. Dimming the light of dollar alternatives is the economic form of a negative strategy to kick the can of disorder forward. We witnessed this in 1974 and 1979 with the exact same gold commentators then declaring an end to the bull market. It did not succeed, market wise, then and has little chance of success market wise now. – Jim Sinclair

  • Leao

    I’m normally suspicious of conspiracies but why has gold fallen so dramatically? The arguments seem so weak: The global economy’s apparent deflationary tendency, tiny Cyprus’ possible gold sell off and Goldman Sachs’ advance announcement of a move against gold. The price of gold could drop a little because of these factors but “the biggest dip in 30 years”?!

    This argument by Paul Craig Roberts seems compelling: http://tinyurl.com/chdv73s especially for questioning why Goldman Sachs might forewarn the general public of their move against gold.

    “Does anyone believe that hedge funds and Wall Street would announce their sales in advance so the small fry can get out of gold at a higher price than they do?”

    Tell me if I’m stupid but doesn’t this chap have a strong case?

  • optimus prime

    So it takes only 2 guys to convince the entire world to have confidence in the central bank and thus people can sell their commodity especially gold and start investing in riskier assets for the sake of profit. What kind of bulls@#$t is that? moneyweek you got the balls to say it to your readers just to make some quick buck.

  • Jimmy O’Goblin

    #35 Boris.
    Thank you for the correction. Yes uncharted is the word. So is precursor… nor precurser. Oh, it was the excitment of it all, I expect.

    Best wishes,
    JOG.

  • MichaelL

    >especially for questioning why Goldman Sachs might forewarn the general public of their move against gold.

    >Tell me if I’m stupid but doesn’t this chap have a strong case?

    Stupid. “They” (you know the those-people, with links to those-people with black helicopters , yeah…) well they just said “we’re shorting X” not, we are heavily invested in X and now want to sell. Just “we can make some money, because we’ve shorted X and its overbought”.

    We should ask Ellen if it has anything to do with Area 51. Still with a balanced money week portfolio of Japanese equities (ok, they earnt nothing for two decades and will take another decade or so to break even), why worry…

  • Tuesday

    Had to sell a big chunk of my bullion vault holding a couple of weeks back to make an ISA payment. Was rather kicking myself at the time with John Stepek, Dominic Frisby, Tim Price, Simon Popple all still talking how Gold was essential and getting better. Phew.

    It is still one of the THREE ways to save yourself from ‘The End of Britain’
    (sic) along with a Japanese trust MW have been recommending for a couple of years. The prediction on Japan no doubt will no doubt become the basis of future marketing for subscriptions. The wrong calls on property, the Euro and GOLD presumably quietly forgotten.

    If you are thinking about it, don’t subscribe. What is written here is for entertainment purposes only!

  • MichaelL

    ‘The End of Britain’
    … now the economy may be rubbish right now. And there is lots to complain about our economic policy, but the idea that the US and to a lesser extend the UK are ‘finished’ is absolute horse s–t.

  • JohnnyC

    I hope everyone understands the reason why the Central Banks are printing money to keep the stock markets afloat is to avoid a Great Depression. If the same approach had been taken during the last Great Depression it would not have lasted so long. As long as Central Banks continue with this approach then the best place for our money is in equities.
    I think that 10% of my Portfolio in gold is too much at the current rate of printing. 5% is more than adequate but I have gone to 0% temporarily as it was destroying total performance.

  • Ellen

    @ 46 Michaell – sure, the conspiracy theory could all be fantasy. But I think it looks more like an orchestrated take down.

    Goldmans advance warning gave it steam and I think this has more to do with the credibility of the US$ than gold if you take the view that the FED do not want wide ownership of gold as a hedge. What just happened was a deterrent for gold investing, which helps the dollar for now. But Benanke has no plans to protect the buying power of the dollar. The current global market conditions of continuously writing IOUs (QE) to pay the bills, and the start of the blatant confiscation of by the EU does not indicate to me that we are over the worst.

  • MonkeyinSingapore

    It’s all getting pretty scary.

    I am dissapointed that MW have not sent subscribers an email with a bit more substance than this one.

    I need someone to hold my hand just now LOL.

  • IJ

    Jeepers! People still long gold should be deeply concerned about the sort of company they’re keeping. Those of you who really think there is a Goldman and Fed-led conspiracy to trash gold ought to ask yourselves: if that’s the case, what the hell you are doing owning it? What chance do you have against these omnipotent forces that can orchestrate price collapses at will without anyone ever finding out?

  • Colin Selig-Smith

    I’m picking up physical gold at the moment. Just like to say thanks to whoever it was that just blew up in Japan. Impressive.

    Oh and this doesn’t bode at all well for stocks, I unloaded almost everythng a month or so back. Watch what copper does.

  • Freddie Mays

    In 2 years no doubt your daily emails will boast about how Money Morning CORRECTLY CALLED THE GOLD PRICE CRASH of April 2013. Just like you claim you called the Credit Crunch and everything else that has ever happened.

    You’ve been relentlessly hyping gold for YEARS now. Worse, you’ve been constantly promoting spread betting in the same articles that you ramp gold. You’ve been telling people to buy an asset that had already risen 7 times in value. And now your chickens have come home to roost.You will have cost your readers MILLIONS. I hope you are proud of yourselves.

  • Boris Macdonut

    #43Leao. The markets are scaling up the Cypriot sell off and assuming that Portugal, Spain and Belgium will have to too.
    Italy has already sold some of its large reserves (third biggest in the world). Simple expectation of supply and demand levels.

  • Peter

    @Freddie Mays

    Don’t be so mellow dramatic.

    Gold will be much higher in the medium term.

    I have used this small crash to add to my holdings I hope it goes lower so I can add more.

  • Freddie Mays

    @ Peter

    I shall try to mellow out :)

    But there’s nothing unfair in what I’m saying. Money Morning are always claiming they “called the Crunch” and that they got this and that right. Only about two dozen people can truly claim to have done that and these people don’t write blogs from Blackfriars.

    They have helped inspire this frenzy. Costing their readers dearly. That is fair comment.

    Fair play to you for having the courage of your convictions. If you are right then now is really the time to get back on the horse. I admire your bottle. I wish you well but I fear for you.

  • Mrs C

    DavidF@37
    Yes, you’re allowed to wonder. We all do. :)

  • DavidF

    Mrs C@58

    Thank you Mrs C. I suspected that was dr ray’s objection. Someone who does not know the difference between two similar sounding but distinctly different verbs.

  • mike

    I’m with a lot of other commentators – why has MW been so bullish about gold? 4 weeks ago Dominic Frisby said “I’m betting that gold will hit £1,600 an ounce by the end of next year”. Well he might be right – anything could happen but headlines like that make me distrust the other advice much of which is good.

  • Boris MacDonut

    #60 mike. Well spotted. The Emporer has no clothes.
    #56.Peter. Have I missed some irony or did you mean melodramatic? In a good Victorian melodrama an evil moustachioud fellow would tie a damsel to a Railwayline.
    Mellow drama is clearly something altogether more laid back.

  • iluvpelageya

    The problem here is that instead of treating gold as a store of wealth, people have treated gold like a growth stock that pays no dividend. Well, it has behaved like a growth stock that pays no dividend. It has just tanked. And people are looking for others to blame. Try looking in the mirror.

    The banks were closed in Cyprus. No one had any money. Couldn’t fill the car. Couldn’t buy food. But those who had gold and silver could. If you are ever strapped for cash, you can get a loan off the pawnbroker. You really need to treat gold on its own terms. It will see you through all kinds of disasters. Those who expect to become billionaires overnight will be disappointed.

  • Orb

    (Off subject:

    Would all and sundry mind if we stuck to a debate rather than a nit-picking grammar, spelling, or drama lecture courtesy of the font of all knowledge desperate to add a personal credibility stamp? We know it doesn’t affect/effect (http://www.moneyweek.com/news-and-charts/economics/uk/biggest-lesson-margaret-thatcher-politics-matters-63410? comment 64) this or any other topic.

    Thank you)

  • MichaelL

    “Gold is an insurance policy” – Moneyweek. This is not true.

    If Gold is so volatile and has been a victim of its own success – it can’t fulfil the requirement to be an insurance policy.

    Mot a question of if you bought at 20£ an ounce in 1845, it is an insurance policy if its volatility is low , if the volatility is high (and it is at present) it can not function as an insurance policy. Someone may buy at a completely inappropriate price.

    If the value moves over a huge range over 10-20 years (up and down) – again its simply not an insurance policy to a retirement or other portfolio.

    Argue the case for it being a good investment, but if that has turned or turning sour, to suggest its suddenly an insurance policy is utter garbage – buy some put options on your indexes and
    some ccy options – those are hedges.

  • Ellen

    @63 Orb Completely agree. Just an excuse to invalidate people’s point of view by constantly correcting their spelling/ grammar.

  • Ped Antic

    #61 Emperor pehraps ?

  • dialucrii

    I find it really strange that the gold bears are acting as though the game is over and those who shunned gold have emerged victorious. Do they not look around the world and realise that the game is just hotting up? The greatest QE experiment the world has ever seen marches on and this drop in gold price is surely just a chapter in the overall story?

    There is plenty about it that I do not like, not least the fact it pays no dividend, but I see myself as having very little choice. I can either back fiat currency, which we know from history will ALWAYS revert to a value of zero, and something that has held its value for thousands of years. At present, many of the worlds currencies are hinting that they might be in the throes of death. Nothing is certain, but to me it makes sense to go with what has the best odds, right now that’s gold.

  • marksh

    People speak of gold not paying a dividend or having earnings but that’s because it is a money/currency.

    The whole point of a store of value is something which cannot reproduce (inflate) or get destroyed (deflate).

    There is only enough gold on the surface for everybody to own about 2/3rd’s of one ounce each, which is about $8 trillion.

    The FED is on a money printing policy of $85 billion per month which is $1 trillion per year, so in 8 years time (as if it could go on that long) they will have printed enough money to have a face value of all the gold that exists on the planet @ today’s price.

    Does that not give anybody pause for thought?

    The biggest danger is the bond market, if the bond market blows up i’m 99.9% certain it will take equities down with it.

    They keep inflating bond market and nothing goes up forever, the debt cannot go up forever, they cannot print money forever and i think it is fair to be worried about the fallout if/when it all pops.

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