Gold’s Double Whammy Is In Play

The common reasoning behind investing in gold is centered on inflation fears, although that has been proven to be a myth, and I wrote the article “Gold: Deflation, Stagflation, High Inflation, It Doesn‘t Matter!” on July 31, 2011 that indicated how the World Gold Council, the ultimate authority on gold, was making a hard sell from every angle. After all, the organization’s magnificent marketing campaign that started in November of 2004 with the introduction of the SPDR Gold ETF (GLD) created demand beyond the commercial realm, and was the true wind beneath gold‘s wings. The other major ETF, iShares Gold Trust (IAU), was introduced in January of 2005. Between 2003 and 2012, investment demand grew into a 45% segment from a meager 10%, while reducing the jewelry and technology segment to 55% from 90%. In addition, combined demand from jewelry and technology declined 18.6% — from 2,870 tons 2,336 tons — during the same period, while ETFs, bars and coins rose from 304 tons to 1,535 tons, or a 404% increase. In hindsight, the World Gold Council must have sensed trouble on the horizon right before gold peaked in September of 2011, and tried to make an investment case that covered the whole spectrum of economic conditions.


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