Cash out of gold and send kids to college
Just like the non-barking dog in the Sherlock Holmes story,
the gold price has become strangely insensitive to the usual stimuli.
The eurozone remains locked in an
existential crisis. Growth is fading in the US and China, and policy
makers appear conflicted or just plain clueless about how to respond.
Meanwhile, losses and scandals at large banks are
coming to light weekly.
Unsurprisingly, investors are running scared. The global
flight to safety has seen capital flood into “core” sovereign bond markets,
driving yields down almost to vanishing point.
Yet, despite this perfect storm of financial instability,
the gold price remains becalmed. In fact,
over the past year gold bullion has behaved like a “risk on” asset, rising and
falling in sync with stock markets.
This makes sense. For most of human history, gold existed as
an alternative to conventional finance, a “store of value” that could be relied
on in times of distress and crisis. Gold bugs may hate to admit it, but those
days are long gone. Gold has become just another financial asset, as vulnerable
to the shifts of investor sentiment as an emerging market. It is symbolic of
today’s world that one of the largest exchange traded funds is invested in gold
bullion, not equities.
So why has the golden dog suddenly gone silent? One likely
reason is that the price has simply become too rich.
Read the full article @ http://www.ft.com/cms/s/0/312bf416-d1a7-11e1-bb82-00144feabdc0.html#ixzz237sWWVwx
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