The reverse gold rush

"A reverse gold rush is underway," says Ian Campbell on Breakingviews. After a sharp fall last month, the yellow metal slipped by another 6% last week and is well below $1,400 an ounce. It has fallen by around 30% from its record peak in late 2011. Institutional investors, encouraged by signs of gradual economic recovery, continue to ditch it in order to find yield in stock or bond markets.

According to the World Gold Council, overall investment demand fell by 49% year-on-year in the first quarter of 2013. Investors in exchange-traded funds rushed out, with net sales of $9.8bn. That offset higher demand for jewellery and for gold bars and coins as investments.

Gold is "unloved", says Michael Cuggino of Permanent Portfolio Funds, because there has been no sign of inflation, and it doesn't provide a yield or dividends. But "that's short-term thinking". He is holding onto gold as insurance.

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Quite right too: not only could the euro crisis flare up again, but it's too soon to write off inflation, especially because central banks, who are debasing currencies and printing money on an unprecedented scale, have never been much good at draining liquidity from the system to pre-empt rising prices. Gold, the ultimate store of value, is down, but not out.