The silence in the major financial media on gold and precious metals last month was deafening. As recently as a few weeks ago, you couldn’t get away from gold headlines if you wanted to. For months leading up to gold’s parabolic jump, the financial press was inundated with articles about gold. Most were wildly bullish, but there also were quite a few bearish articles to be found — and I wrote a few of those bearish ones.
The yellow metal certainly gave us all plenty to write about. In a short-lived bout of speculative hysteria, the price of gold soared above $1,900 in early September before quickly falling back down to earth, losing $300 in a matter of weeks.
But throughout the month of October, very little was published on gold, bullish or bearish. It’s as if the investing public suddenly lost interest in the yellow metal.
Some of the waning interest is understandable. Gold’s reputation as a “safe haven” certainly lost its shine with October’s action. Safe havens do not exhibit that kind of volatility. And when it really does appear that the world is ending, it is to the safety and liquidity of U.S. Treasuries that they run — not that most barbarous of relics, gold.
Yet a funny thing has happened. Quietly, under the radar, gold has mounted a comeback, rising more than $100 per ounce in just the past week.
As a professed gold bear, this makes me pause.
Gold is rising quietly, in the absence of the usual blustery gold bug bravado. This suggests the weaker buyers were shaken out by last month’s volatility and the current rise might be a little more durable.
It appears gold’s role has shifted from that of “crisis hedge” to “risk asset.” After Europe’s announcement that it finally is serious about sovereign debt seriously jolted investors’ animal spirits, all risky assets have gotten a boost. This includes global equities, industrial commodities and, yes, gold.
I’ve made known my skepticism of gold’s value as a long-term investment in past articles. It pays no interest or dividends, it has little in the way of intrinsic or industrial value, and the only way you profit from gold is by finding someone willing to pay more for it than you did. That’s not an investment; it’s a high-risk speculation.