lunes, 28 de julio de 2014

lunes, julio 28, 2014

Heard on the Street

Even in Rockets' Red Glare, Gold's Glow Dims

By Liam Denning

July 25, 2014 1:28 p.m. ET


Paranoia, war, economic dystopia: The world of the goldbug isn't a happy place. But sometimes that suits them just fine. Their beloved metal has, after a dismal couple of years, enjoyed a bounce in 2014.


Gold's gain of about 8% puts it a little ahead of the S&P 500. To what do gold's fans owe this good fortune? One obvious answer is a fraught geopolitical environment. After all, one of gold's many, shifting identities for investors is as a hedge against mayhem.

While upheaval makes for a ready, and dramatic, narrative to justify a rally, it ultimately makes for weak support.

It is tempting, especially as the years go by, to think the world is going to hell and that times were better in the old days. But in recent years such sentiment may actually be justified to a degree

Maplecroft, a global risk and security consultancy, compiles an index assessing political risk in nearly 200 countries. Between 2010 and early 2014, the proportion of them described as low risk fell to 19% from almost 44%.

Meanwhile, those described as having high or extreme risk rose to 36% from just under 30%. A large proportion of countries migrated up from low to medium risk.

On that measure, the world does seem more dangerous since 2010. Yet while gold prices did run up in the intervening period to an all-time high of about $1,900 an ounce in 2011, they have averaged just under $1,300 so far this yearnot appreciably higher than 2010's average.

The more important factor in gold prices has been a more mundane one, even if it is still nefarious in goldbugs' eyes: inflation.

Chart gold prices over the past five years versus real interest rates and the two lines form a mirror image. Real rates adjust for inflation; they turned negative in early 2011. When this happens, the cost of holding gold—which yields nothingbecomes less relevant and its value as a hedge against inflation and the potential for currency devaluation due to low rates come into focus.

Real rates snapped back upward last summer when former Federal Reserve Chairman Ben Bernanke signaled the beginning of the end of the central bank's extraordinarily lax monetary policy. That led to a sharp correction in gold.

Since then, real rates have hovered around zero as sentiment has waxed and waned over how quickly the Fed will tighten interest rates and whether or not inflation might make a comeback. Gold's biggest one-day gain this year came not amid rocket attacks but comments from Fed Chairwoman Janet Yellen in June reiterating rates would stay low for longer despite more positive economic signs.

That would certainly seem to set up the sort of environment goldbugs dream of: namely, lax policy amid a strengthening economy. Yet the jury is very much out on whether inflationary pressures really are building

And, timing aside, the medium-term trend of real rates remains upward, casting a real shadow over gold's prospects.


0 comments:

Publicar un comentario