The yellow metal is now 26% off its 2011 high of $1,897 per oz, while its poor relation silver is 55% lower than its high of $48 per oz hit in the same year.
“Gold has become the world’s laziest investment and there is simply no price at which gold enthusiasts wouldn’t rather buy more than sell, despite all reasonable attempts to value gold pointing to its chronic over-valuation.
“We believe there is worse to come for gold, gold miners and gold bugs, particularly if the US economy continues to recover at its current pace,” Norris added.
Until the end of May, Kleinwort Benson’s CIO Mouhammed Choukeir was still using gold in his portfolios, find out what changed his mind…
He views today’s trading price of around $1,400 per ounce – nearly six times its inflation adjusted fundamental value of $240 per ounce – as madness and thinks gold has become this generation’s asset bubble.
In addition, the precious metal has disconnected with inflation, the very element of the markets it is supposed to hedge.
Since 1968 whent eh fixed $35 per oz peg was replaced with a private market the US consumer price index of core inflation has risen from 15.6 to 106.7. This is equal to 584% or an annual rate of return of 4.5%. Over the same period gold has risen from $35.3 per oz to $1400 per oz today, which equates to 3867% or an annual return of 8.7%.
Looking at the 13 years since the turn of the century and the difference is even more vast, with inflation increasing just 2.4% per annum, compared with 12.5% per annum from gold.
