Why everyone now hates gold

Read what Jim Sinclair has to say and go buy some physical gold. In 3 to 5 years from now you'll be smiling.

Regurgitation of old news. Did NOT offer his opinion on Why Everyone Hates Gold. Disappointed.

Hello rockndan -

Those are both fair points - this was written for our magazine some time ago but unfortunately fell through the net of our republishing schedule. The pressure to capture people's eyeballs online is such that we sometimes run the risk of overselling, but having written the headline I now feel I should justify it!

Very broadly, people seem to have begun to look beyond the immediate investment horizon and are beginning to get antsy about what happens when interest rates normalise.

That is beginning to remove some of the weight of opinion behind fears of currency debasement - the more apocalyptic end of which I have always struggled to buy-into anyway. And that of course has been the following wind behind the dollar, which almost creates a self sustaining move out of non-yielding, dollar-denominated assets.

Aside from those fundamentals, you obviously also have the short sellers adding their own momentum. But those guys can turn on a dime, so wouldn't really see that as any substantial indicator - just a hook

China hates gold? China has been importing massive amounts of physical gold on a monthly basis. The Chinese realize the mass debasement of the US dollar and they are moving out of it as quietly as possible. It's not doomsday preparation, it's simply common sense. I guess it's normal to go into town and spend 250$ on gas and a few things at Cvs. You can't go anywhere or do anything these days without dropping a bucket load of fiat. The shorts or the big banks i should say will be covering in due time! No question.

ETF Securities reports a net increase in their gold ETP product this past week and a net increase year to date of US$831 million. Outflow in the last month however was $636 million which is just 3.5% of the $17.7 billion total held in their product.

I suspect we're seeing net outflows in N America yet at present which accounts for the short interest volumes but net inflows in Europe, Middle East, and Asia. Cyprus events should be supportive of net inflows and retail gold offtake in coming weeks.

Net-net we're seeing a power struggle in the gold market between investors with different time horizons and investment goals. Traders are short in the short term, legacy investors are long and compelled to buy more.

Surely the most plausible reason why gold may fare poorly in the future is simply that the US Dollar faces a period of structural strengthening. Its economy is the best of a bad bunch amongst major developed economies and is likely to be the first to wind down QE and the first to raise interest rates. Sentiment-wise, the role of ETF investors historically has been one of nothing but speculation and a belief in ever rising prices; that can work both ways! Finally, gold is only ever going to be a small fraction of EM central bank reserves as they need to stay liquid. You may or may not make money in gold going forward but treat it as what it is, a speculation not an investment.

Gold is cheap by any historic inflation adjusted metric. The shift in sentiment towards ETF gold positions is probably more to do with distrust of custodian accounting for the physical ETF's but the slack is clearly being taken up by demand for coins, small bars and such like. In bullion centres it would appear that China, Russia, India & most of the CREDIT nations are still momentum buyers when tonnage becomes available. Gold is NOT discredited but much of the hype is. If the monetary system continues to buckle under the stresses that keep recurring the likelihood of a NEW GOLD STANDARD increases. It seems that the world is already in a PSEUDO GOLD STANDARD but developed western nations have yet to face up to these conditions.The Cyprus situation highlights an increasing distrust of the current system. Many gold analysts have technical targets credibly as high as $6,000pto and there are those less credible with much higher price targets. The question is simple; in a worst case scenario do citizens caught in the crossfire want to rely on fiat currencies, synthetic instruments, etc or prefer to have a few coins close to hand?

Gold is lovely and shiny and looks lovely and shiny when made into jewellery. It also has some industrial usefulness. Otherwise it is merely speculative.