The Fools’ Gold or the Real Deal?

Stephen Todd Walker

Chapter 8 in Understanding Alternative Investments, 2014, pp 147-157 from Palgrave Macmillan

Abstract: Abstract Gold moves in waves like other commodities. For example, gold went from a trough to a peak (April 20, 2001–September 5, 2011) and then from a peak to a trough (September 6, 2011–December 19, 2013). I call this Gold Wave VI since this was the sixth time that gold exhibited a clear cycle, pattern, or trend. Many self-proclaimed gold experts mistakenly forecasted that gold would surpass $2,000 per troy ounce. It did not happen. Any naysayers of Wave Theory were proven wrong again. Yet a reversion to the mean was inevitable. Amongst other dilemmas, the stock market collapsing from the tech bubble and then again from the real estate bubble drove scared investors to this precious metal. Gold looked like it was going straight into the sky. Eventually, however, a wave will reverse. Trees do not grow to the sky. Gold reached a nadir in August 2011 at $1,888.70. By April 2013, gold dropped to $1,361.10 per troy ounce. Gold plummeted to $1,195.00 by December 19, 2013 and lost -29 percent year-to-date. Hedge funds and other “smart money” investors began selling. Besides institutional investors, governments stockpiled the yellow metal for years, which also helped drive the price higher. As the United States and other economies recovered, investors turned to equities and focused less interest on gold. Recent sales occurred with gold ETFs during the first quarter of 2013. The reversal of the gold wave was not a surprise.

Date: 2014
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DOI: 10.1057/9781137370198_9

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