Time to Liquidate That Massive Gold Hoard in Your Basement

  • Share
  • Read Later
GP Kidd / Getty Images

Few assets performed worse than gold in 2013, as investors fled the precious metal due to an improving U.S. economy and continuing low inflation. Most forecasters believe these factors would only continue to put downward pressure on the price of gold in 2014, but the metal has been defiant in recent weeks, rising to a two-month high yesterday of $12.50 per ounce:
Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

As you can see, gold has a way to go before it recovers the losses suffered in last year’s collapse. But does the recent uptick represent the beginning of a rally or a chance to get out? According to Sameer Samana, a strategist with Wells Fargo Advisors, it’s the latter. Samana writes that gold saw an unprecedented run up in price following the bursting of the tech bubble in 2001—a trend that was motivated by falling interest rates and yields on corporate and government bonds. Smaller returns on those assets forced investors to look for alternatives.

Smaller returns also motivated investors to sell their dollar-denominated assets and look overseas for stronger investments. This dynamic led to a cheaper dollar, which also boosted the price of gold relative to the dollar. But those trends, of a weaker dollar and low-interest rates, have reached their end, and in 2014 and beyond a recovering U.S. economy and rising interest rates will make gold a bad bet. Writes Samana:

“Historically, bounces in markets that are in downtrends tend to be shallow while declines tend to be sharp and significant. So far in 2014, gold and silver have enjoyed modest price rebounds but, given our outlook for a further downtrend, we recommend investors use the slight bounce in prices to eliminate exposure to this sector.”

How poorly will gold perform in 2014? No one knows for sure, but earlier this month Jodie Gunzberg, Vice President, Commodity Indices at S&P Dow Jones Indices tackled this very question. The last time gold had as tough a year as 2013 was 1981, when the precious metal lost 32.8% of its value, she points out. Gunzberg writes:

“The last time gold fell this much was in 1981 when it lost 32.8% and it took 25 years to recover its drawdown.  Although in 1982, gold rebounded 12.5%, it lost another 32% in the next 2 years. If history repeats itself, it could take a long time for gold to recover but it could be viewed as a bump in the road of the long bull trend that has gained over 700% in the prior 12 years.”

So is there a bullish case for gold in the short-term? One point gold boosters point to is strong demand for the metal in Asian countries like China, India and Japan. Also, cheap gold prices may cause unprofitable gold mines to close, limiting the supply of the metal and supporting the price of gold. But gold investing isn’t for the faint of heart, and if you’re sick of trying to predict how investors will feel about this wildly unpredictable investment, the recent bounce might be a good time to get out.

25 comments
Gold_Investing1
Gold_Investing1

Germany asks the Americans to return its 300 tons of Gold stored in the US. Strangely, the Federal Reserve is unable to provide it, and promises to return the gold in installments over 8 years. It then returns just 37.5 tons of the 50 tons promised in the first year. The strong suspicion? The gold isn't there any more. It has been lent into the market years ago, or has multiple owners, or is backing a cluster of gold exchange-traded fund derivatives. One option? Continue artificially driving the price of gold down, flush weak gold holders out of the market and - as a government - restock the gold coffers at an induced discount so that you can return trillions of dollars of the stuff to the Germans.


Paranoid? Delusional? Conspiracy theorist? I'm probably all of those things. But given the choice between increasingly scarce gold and increasingly QE-inflated paper, I know which one I am holding onto.

Herma975
Herma975

Should I even consider this news worthy like the elder sex porn article ? Ppl that never saw the rise to gold should not have audacity to call the tops if never followed golds run other than some past charts

OysterRoman
OysterRoman

Sure, lets see..the Central Banks and the entire Middle East and the Far east are NET buyers and have a voracious appetite for Gold and Silver and you the poor working sap is being told to sell us that Gold you have? Sure, why not, do as I say, not as I do.  

AdamLu
AdamLu

Yeah, right after the market loses 500 points in 2 days... great time to dump your gold...........................?

kirkmtwilliams
kirkmtwilliams

yeh gold is worthless, I'll buy all you have for $500/oz

because when the dollar CRASHES this year, gold is going to $3500/oz

WTF listens to Time magazine  ?  the same people that bought and hacked the Zapruder film, and helped cover up the JFK assassination

yeh, like they are reputable....

get a life, Time.  We're on to you

lees2002
lees2002

Non-sense,  Gold is going to go back up to 1.6k by June

daleholmgren1
daleholmgren1

Time Magazine, I see gold is going up, should I buy? NO.  Time Magazine, I see gold is going down, should I buy? NO.  Is there ever a good time to buy gold, Time? No, it is the only asset class that it is NEVER a good time to buy.


Any time you see these relentless bearish articles on gold, especially after it's gone UP, you should be very suspicious that some men in NYC are calling up their media friends to rush out few dozen gold-bashing articles.  I don't blame Chris Matthews, I don't think he WANTED to write this garbage-can journalism, but he needs to do what his bosses tell him, I'm sure.

johandesilva
johandesilva

Where the heck was this article in 2013? Not that it matter to me I was out of gold mid 2012 knowing all this with green shoot of economic  recovery. But that was the bounce in the recovery... now however is the time to buy low cost gold mining assets :)


VinGatsby
VinGatsby

time to buy you morons.  And gold is not $12.50 an ounce.  try $1267.50 as of RIGHT NOW.

robertbradf
robertbradf

Gold receded from its six-week highs in the early parts of the European session after an increase of more than 2% yesterday but http://

j.mp/1caSA49

LindseyMyron
LindseyMyron

$12.50 an ounce? Are you sure about that?

JosephHall
JosephHall

I don’t get gold.  I’m with Warren Buffett, it doesn’t do anything or make anything.  And we’re never going back to the gold standard.  My broker wanted me to buy gold a few years ago.  I said no and bought GAAEX.  I got creamed in the short term, but I stuck in there.  GAAEX was one of the best performing funds last year, gold tanked…

pterosaur199
pterosaur199

Easy to spot the bias in these articles.  "Defiant".   When have you seen Time use this word in conjunction with housing or the stock market rising?   Defiant in what respect?  Against the Naysayers?

bake7734
bake7734

We are looking at a 1000% increase in gold prices. DON'T SELL! All this rhetoric is a trap. There is ZERO positive news with debt, unemployment, etc... Only fake numbers and lies.

BrooksK.Potter
BrooksK.Potter

When the price of Gold is low that is the time to buy!

bobbyyessir
bobbyyessir

I bought my Krugerrands when that idiot Gordon brown started selling the UK's gold at crazy prices, I'm very pleased with its performance and would not dream of unloading,l reckon it will hit £4000 + in the next few years.

pterosaur199
pterosaur199

@VinGatsby 


Time represents the state and they have never been friendly to gold because it is an asset class that competes with the dollar.   

JoeParente
JoeParente

@LindseyMyronYeah, what the hell is he talking about? Any article that cites a price two orders of magnitude less what it actually is, is absolutely not worth reading further.


As long as the Fed keeps printing more and more of those fiat Federal Reserve Notes, gold will go up. It always has, it always will. I say it's a buying opportunity!

billk585
billk585

@JosephHall  from geology.com ...."Of all the minerals mined from the Earth, none is more useful than gold. Its usefulness is derived from a diversity of special properties. Gold conducts electricity, does not tarnish, is very easy to work, can be drawn into wire, can be hammered into thin sheets, alloys with many other metals, can be melted and cast into highly detailed shapes, has a wonderful color and a brilliant luster. Gold is a memorable metal that occupies a special place in the human mind". 

ajs
ajs

I am so proud that more and more people are waking up and realizing this false illlusion we are being fed by the control system through their propaganda.