Quick Update On Gold, Redux
At the risk of sounding like I'm obsessed with the price of gold, I saw more anecdotal evidence today that gold's epic run is over, or at least that it will be soon. This Financial Times headline speaks for itself:
"IMF Left Holding its Gold as Buyers Fail to Materialise"
The FT writes,
When India bought 200 tonnes of gold from the International Monetary Fund late last year, investors assumed other countries would follow, viewing New Delhi's move as a sign that Asia's central banks were diversifying their swelling reserves from US dollar assets into bullion...
But the IMF's announcement on Wednesday that it has not found further buyers for the remaining 191.3 tonnes it wants to sell -- equal to about 5 per cent of annual global demand -- signals that other central banks are not ready to buy.
Surprise, surprise. Rumors of the dollar's death proved to be greatly exaggerated, as did central bank demand for gold.
As I wrote earlier this week (see post), gold bulls are starting to come up with creative theories as to how the decade-long bull market can continue, with "perceived gold weakness is actually just dollar strength" being my personal favorite. (Wasn't "getting out of the dollar" one of the specific reasons that gold bulls gave for buying gold?)
The FT is not immune to this kind of creative thinking either. The writers were quick to point out that Asian central banks could be secretly increasing their gold holdings to avoid the publicity of an IMF sale. Maybe. Or it could be that, at $1,100 per ounce, central bankers do not find gold to be attractively priced. I, for one, would have to agree with them this time.
Charles Lewis Sizemore, CFA
Chief Investment Officer, Sizemore Capital Management LLC
The views expressed in this post are the personal views of Charles Sizemore and may or may not reflect the investment policies and decisions of Sizemore Capital Management.
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