But what is it about gold? Where does it come from? Where does it go? You certainly can’t eat it.
Below is a chart from Morgan Stanley’s Global Metals Playbook. And it answers all questions.
Photo: Morgan Stanley
Even after it recently fell below its critical 200-day moving average, Morgan’s not concerned. Here’s their take;
Gold prices have fallen sharply since reaching a new all-time intraday high of US$1,925/oz on September 6, 2011, and a closing high of US$1,889.7/oz on 22 August. The retreat to US$1,541/oz on December 29 represented a 18.5% decline from the record peak on a closing basis. In the process, the spot price trend broke the 200-day moving average in mid-December, raising fears that the 10-year bull market in gold was coming to an end.
We have a different view. Such corrective price movements, while less aggressive than that in 2H 2011, have been evident throughout the 2001-2011 bull market, especially since the acceleration in the uptrend from 2009. Moreover, the timing of the sell-off, especially to the sell-off low in late December, suggests strong selling pressure linked to year-end book squaring, portfolio adjustments and commodity index reweighting. Furthermore, the sell-off also coincided with an especially sharp rally in the TWI of the USD, a strong headwind for gold given its USD pricing and quasi-currency function.