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Gold price just won’t budge
There’s panic in Shanghai and Shenzen, chaos in Europe and today the world’s top financial market ground to a halt.
Gold goes up $5.
Whatever happened to safe haven buying?
There’s a lot of conspiracy theories about why gold’s been so lacklustre despite a world on fire.
Some are more convincing than others.
Without naming names (you don’t have to), Ross Norman, CEO of bullion brokers Sharps Pixley in London, explains why gold has been going nowhere.
Norman, the London Bullion Market Association most accurate forecaster coming in as the outright winner five times and a runner up four times, tells Arabian Money that “somebody big is sitting on the gold price”:
‘Gold is looking like the dog that just did not bark – but not uniquely so,’ he commented. ‘Most safe haven assets are looking distinctly lacklustre, including the VIX index.
Either 5,000 years of safe haven buying has just become bunk, or there is a desire to portray what it is evidently a financial and economic crisis as nothing to be concerned about.’
Norman is the most bullish analyst in the LBMA’s 2015 competition with a forecast of $1,321 average and a $1,450 high.
A more mundane explanation comes from Leon Westgate, an analyst at ICBC Standard Bank quoted by the FT as saying “at times of acute volatility in markets, gold’s long-term role as a haven could be overshadowed by short-term needs”:
“The precious metals markets were reminded yesterday that the utility of gold and silver at times of financial stress is primarily as a source of cash to fund margin calls and repair damage to balance sheets and bank accounts,” Mr Westgate said.
“It was also reminded that US Treasuries, not gold, are the default safe haven for the vast majority of financial institutions.”
Georgette Boele of ABN Amro weighs in on the topic in the Dutch bank’s Wednesday research note arguing that gold’s safe haven status has been tarnished by speculators:
“At the height of the global liquidity crisis (when there was a shortage of liquidity) gold prices dropped sharply because investors valued cash more than gold.
“This suggests that at times of severe crises, gold could not live up to its safe-haven status. The variation in the gold price has coincided with a buildup and liquidation of outstanding investor positions in gold.
“This is not a positive development for a safe-haven asset, because significant investor activity could indicate that it is used for speculation rather than as a safe haven.”
FLASHBACK: Billionaire Frank Giustra: “Gold will be the final bubble”
Image by Simon Mugridge
3 Comments
CanuckleDragger
Gold is doing what the fed and the powers that be want it to do.
Rod B
Remember that old camel? It could carry a huge load for days without even one drink of water. The old international trader that used to carry his spices and salt on the camel sold the beast to a young purveyor of computer parts and slick looking watches that cost so much he was sure he could sell them at a good profit to the people in the adjacent country, or the next one over. So, he loaded up that old camel and kept buying new gadgets to put on board for his trip. He didn’t give a thought to feeding the poor camel, but just kept on piling on the stuff. Everything looked good and he was ready to go, but the camel stopped after a day and refused to go further.
Like the load on the camel, international debt has become very heavy. It appears to me that we cannot go very far. Bitcoin is not going to solve the problem. Fiat currencies will not solve the problem either.
It has been three generations where people have not appreciated gold for its “discipline-principle”. When that realization becomes apparent, it will probably be too late.
Peter Cooper
China’s policy response to its stock market crash will pull gold back up as explained on arabianmoney.net today…