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Stockmarket up,
precious metals down. Will the final 'bugs' now throw in the towel...?
YET MORE money managers threw in the towel
on gold this week, pulling the big gold trust-funds' holdings down to new
four-year lows as the Dow closed at new record highs.
Typically in the grand
sweep of things, markets need a final surrender to mark the end of such
trends.
Because only when the
last bull takes all the losses he can and sells �– or the last bear
quits waiting for a crash and buys �– can a market really turn itself
around.
London's would-be
homebuyers, for instance. Sitting out the surge in prices, a friend who
always thought the bubble MUST burst at some point has just given in, and
bought a flat. Gulp!
On the other side of the
hill, and after getting beaten down by months and now years of falling
prices, big-name gold investors are finally throwing in the towel, too. Well,
kinda. And who could blame them with stocks up, gold down?
"This year hasn't
been good for gold," said David Einhorn, fresh-faced card shark and
hedge fund manager at Greenlight Capital, to CNBC on Thursday.
Building his fund's
position since 2006, Einhorn switched it in 2009 to physical, allocated gold
just like you can trade on BullionVault. Because "at a
minimum" it would save him money compared to ETF trust funds.
Today he's not buying
more. Which is gold
capitulation of a sort. But Einhorn isn't selling. "Just in case
something goes really, really, haywire."
Also sticking with gold
is the biggest bull of them all, John Paulson. His Paulson & Co. hedge
funds' owned $4.6bn of the giant SPDR Gold Trust just before gold peaked in
mid-2011.
Halving his holding in
that fund (ticker: GLD) as prices crashed this spring, however, Paulson kept
it flat between July and October. He ended the third quarter with GLD stock
worth $1.3 billion. And this week, says Bloomberg, he reportedly told clients that he wouldn't
personally buy gold right now. Because the inflation story he's expected for
the last five and six years simply hasn't shown up.
This, we guess, is as
good a sign for gold (and by extension, silver) as we've had all year.
Because "Gold bugs die hard," as the New York Times said
back in June 1999. It's worth re-reading that story today. If only for
Jean-Marie Eveillard's close brush with closing his legendary gold fund.
That was amid deafening
reasons to quit the market. It was also just before gold bottomed at $250 per
ounce, and turned 7 times higher as the financial world, in Einhorn's phrase
above, "went haywire".
Today again, "People
are finding it hard to find a reason to own gold," one analyst
tells the Wall Street Journal. But how about we try insurance,
Lehman Brothers, or record-high peacetime Western debt levels?
All you need is an
attention span longer than a goldfish's. And deep pockets, of course, to carry
the financial loss which all gold and silver bulls who failed also to invest
in the stockmarket this year are now wearing.
Insurance pays nothing
when nothing goes wrong. That doesn't mean you don't need it. But it does
make throwing in the towel all the more tempting when stockmarkets are
setting new record highs which you're sitting out.
The thing with insurance,
remember, is you also need to own something to insure. Otherwise, unless
disaster strikes, you'll wind up paying the premiums to no purpose.
Adrian Ash
Adrian Ash is head of research at
BullionVault, the secure, low-cost gold and silver market for private
investors online, where you can fully allocated bullion already vaulted in
your choice of London, New York, Singapore, Toronto or Zurich for just 0.5%
commission.
Please Note: This article is to inform your
thinking, not lead it. Only you can decide the best place for your money, and
any decision you make will put your money at risk. Information or data
included here may have already been overtaken by events �– and must be
verified elsewhere �– should you choose to act on it.
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