Hold gold in case there is inflation. Hold gold in case there is a geopolitical shock or uncertainty. Hold gold if there is an inflation surprise. Hold gold if there are negative real interest rates. Take your pick, but none have applied to the gold market over the last year. We are in a gold bear market from the highs in 2020.
There is an almost 20% decline since the highs in 2022 after the initial invasion of Ukraine. There is no fear embedded in the price. If you looked at the gold chart without any other knowledge, you would think inflation is low and falling, real rates are positive, and there is not a lot of geopolitical risk. You cannot even say that gold was just a flat investment that protected principal.
Of course, looking at the price of gold in other currencies may paint a different picture. The drawdowns for GBP and EUR are less than the bear market in dollars. The price of gold in Yen is much higher but the price is still off highs. Investor must focus on alternative ways to diversify and stay away from this precious metal.
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