Equity markets started off this year by falling. They rallied in February, working their way back into the green. The Standard & Poor’s 500 Index now is up about 1 percent for the year.
Gold has traveled the opposite path: The yellow metal began at about $1,175 an ounce. By Jan. 23, it had rallied to almost $1,300. In February, gold slipped about $60 and the fall continued this month. Gold now is down about 1.6 percent year-to-date and it wouldn’t be a surprise if the precious metal fell more this month. “March has a history of being the worst” month for gold, according to Bloomberg. During the past four decades, on average, bullion futures decline 1 percent in March. “Prices fell 65 percent of the time, more than any other month.”
The reasons gold prices can’t seem to gain any traction are many: Job creation has been robust, inflation is low and the Federal Reserve is widely expected to begin the process of easing back on monetary accommodation — strengthening the dollar and further reducing gold’s appeal.
As we noted late last year, the gold narrative has failed. The promised hyperinflation that was supposed to send gold soaring never arrived. Instead, we had disinflation, with a threat of global deflation.
Other stories were posited by traders who were long on hope but short on cogent analysis. The ballot proposal requiring the Swiss National Bank to hold at least 20 percent of its 520 billion franc ($523 billion) balance sheet in gold was rejected by Swiss voters. Another tale: India was going to cut its import duty on gold, leading to soaring demand. But India decided to maintain the duty. The latest bout of wishful thinking was that a gold version of the new Apple watch would consume “up to 756 metric tonnes of gold per year . . . this equates to roughly a third of gold’s total annual global mine supply,” according to a company called Goldcore. As my Bloomberg View colleague Mark Gilbert explainedyesterday, that fantasy was laughable on its face.[…]bloomberg.com
