End of Golden Age of Gold :

Over reacting or under reacting are usual characters of Analysts and Media companies. All they want to do is create sensation so that readers are glued to their magazines / Newspapers / Websites / fb’s. Following article, written in classic novel style, could be a standing example. Though this article throws lots of facts, they also spray lots of panic. It has been these media / analysts which touted Gold to be Safe Haven. Now they come up with another article saying the Golden age of Gold may be over.

True – the days of Gold ‘speculators’ may be over. But for an ‘investor’ in gold – holding it as an asset allocation – they are still valuable. And Indian’s were investing / accumulating gold since time immemorial. It has been part of culture.

Any asset clause – be it Gold / stocks / real estate’s : which has appreciated beyond proportions, is naturally  bound for realignment to their long term appreciation. This could either be by way of long duration – range bound pricing or fall in price to subsequently catch up with ‘average’ growth rate. We wish investors understand these facts and invest unbiased and create wealth.

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End of Golden Age of Gold : Has gold lost its allure for retail investors?

Below the streets of Lower Manhattan, in the vault of the Federal Reserve Bank of New York, the world's largest trove of gold — half a million bars — has lost about $75 billion of its value. In Fort Knox, at the United States Bullion Depository, the damage totals $50 billion. And in Pocatello, Idaho, the tiny golden treasure of Jon Norstog has dwindled, too. A $29,000 investment that Norstog made in 2011 is worth about $17,000, a loss of 42 per cent. "I thought if worst came to worst and the government brought down the world economy, I would still have something that was worth something," Norstog, 67, says of his foray into gold.


Gold, pride of Croesus and store of wealth since time immemorial, has turned out to be a very bad investment of late. A mere two years after its price raced to a nominal high, gold is sinking — fast. Its price has fallen 17 per cent since late 2011. Wednesday was another bad day for gold: the price of bullion dropped $28 to $1,558 an ounce.

LOSING ITS ALLURE

It is a remarkable turnabout for an investment that many have long regarded as one of the safest. The decline has been so swift that some Wall Street analysts are declaring the end of a golden age of gold.

The stakes are high: the last time the metal went through a patch like this, in the 1980s, its price took 30 years to recover. What went wrong? The answer, in part, lies in what went right. Analysts say gold is losing its allure after an astonishing 650 per cent rally from August 1999 to August 2011. Fast-money hedge fund managers and ordinary savers alike flocked to gold, when the world economy teetered on the brink in 2009.

Now, the worst of the Great Recession has passed. Things are looking up for the economy and, as a result, down for gold. On top of that, concern that the loose monetary policy at the Federal Reserve might spark inflation — a prospect that drove investors to gold — have so far proved to be unfounded. And so Wall Street is growing increasingly bearish on gold, an investment banks and others deftly marketed to the masses only a few years ago.

On Wednesday, Goldman Sachs became the latest big bank to predict further declines, forecasting that the price of gold would sink to $1,390 within a year, down 11 per cent from where it traded on Wednesday.

Granted, gold has gone through booms and busts before, including at least two from its peak in 1980, when it traded at $835, to its high in 2011. And anyone who bought gold in 1999 and held on has done far better than the average stock market investor. Even after the recent decline, gold is still up 515 per cent. But for a generation of investors, the golden decade created the illusion that the metal would keep rising forever.

The financial industry seized on such hopes to market a growing range of gold investments, making the current downturn in gold felt more widely than previous ones. That triumph of marketing gold was apparent in an April 2011 poll by Gallup, which found that 34 per cent of Americans thought that gold was the best long-term investment, more than other categories, including real estate and mutual funds. It is hard to know how much money ordinary Americans plowed into gold, given the array of investment vehicles, including government-minted coins, mining company stocks and physical bullion. But $5 billion that flowed into gold-focused mutual funds in 2009 and 2010, according to Morningstar, helped funds reach a peak value of $26.3 billion.

Since hitting a peak in April 2011, those funds have lost half of their value. "Gold is very much a psychological market," said William O'Neill, a co-founder of the research firm Logic Advisors, which told its investors to get out of all gold positions in December after recommending the investment for years. "Unless there is some unforeseen development I think the market is going lower."

Gold's abrupt reversal has also been painful for companies that were cashing in on the gold craze. In the last year, two gold-focused mutual funds were liquidated after years that saw only the opening of new funds. But the worst news for gold is probably good news for the broader economy, which, though still struggling to grow, has recovered from its lows.

"As the economy improves, the demand for gold as a financial hedge declines more than the fundamental demand for gold jewellery increases," said Daniel J Arbess, a partner at Perella Weinberg Partners, who sold off his fund's large stake in gold in the fourth quarter of 2012.

CHANGING FORTUNE

Investment professionals, who have focused many of their bets on gold exchange-traded funds, or ETFs, have been faster than retail investors to catch wind of gold's changing fortune. The most popular ETF, the SPUR Gold Shares, saw the biggest outflow of any ETF in the first quarter of this year as hedge funds and traders pulled out $6.6 billion, according to the data firm Index Universe.

Two prominent hedge fund managers who had taken big positions in gold ETFs, George Soros and Louis M Bacon, sold in the last quarter of 2012, according to regulatory filings. "Gold was destroyed as a safe haven, proved to be unsafe," Soros said in an interview last week with The South China Morning Post of Hong Kong. "Because of the disappointment, most people are reducing their holdings of gold."

Gold's most vocal bulls say gold doubters are losing faith too easily. Peter Schiff, the chief executive of the investment firm Euro Pacific Capital, said that he still expected gold to hit $5,000 an ounce within a few years because, he said, the world is headed for a period of dangerous hyperinflation.