Gold is losing its shine as a safe-haven investment, as prices for the commodity trade near five-year lows
SYDNEY—Market mayhem is normally a buy signal for one asset: gold. But this time around the precious metal is the dog that hasn’t barked.
The commodity surged to a record high in 2011 amid rising anxiety over the eurozone’s unfolding debt crisis, as mass protests against austerity policies hit the streets of Athens. This year, faced with more turmoil from a deteriorating situation in Greece, investors haven’t yet rushed to gold.
Nor have concerns about China’s economy and its plunging stock market yet caused the sort of panic gold-buying seen in past years.
“Put simply, this year feels as if has had more than its share of drama,” Macquarie said in a client note. “Gold has done nothing. In fact worse than nothing—the price of gold is 3% lower than it began the year.”
Bullion has long enjoyed a reputation as a safe-haven investment, alongside reserve currencies—principally the dollar—and U.S. Treasury debt. Many investors argue the metal is one asset that will hold its value in times of economic or political turbulence because, unlike a currency, its value can’t be manipulated by interest-rate decisions, while it is a physical asset with a limited pool of supply that can’t be quickly altered.
But gold hasn’t shone yet this year, even as industrial metals such as copper and nickel trade have hit six-year lows. Steelmaking ingredient iron ore has endured an eye-watering 26% plunge this month alone.
Gold itself has fallen to near its lowest level in five years, and some 40% below its 2011 peak. On Thursday, it traded at roughly $1,158 an ounce.
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