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BookmarkUnder normal circumstances, I might let a rutty headline about gold in the Financial Times pass without much notice. I say “rutty” because the Financial Times has long been stuck in a rut as one of the principle apologists for Keynesian economics — big banks, big deficits, big governments and powerful central banks. It doesn’t think much of gold enthusiasts and gold enthusiasts do not think much of it. (Although I still read it every morning.)
When I took-in the headline — Bumpy ride in store for gold with price forecast to fall 15% — with my morning coffee, my first reaction was to disregard it, as I do most of the day-to-day, routinely negative Financial Times’ reports on gold. Scanning the article (with the hope some nugget of important information might be gleaned), something tugged at the back of my mind with respect to the entities referenced — Gold Fields Mineral Services (GFMS), Goldman Sachs and Credit Suisse. All three obviously were predicting 2014 would be a bad year for gold. What was nagging was their near-term record in the art of gold forecasting.
So I went to the trouble of backtracking some of their most recent predictions on the gold market:
* GFMS, for example, predicted last April that gold would once again visit the $1800 per ounce level before year end. At the time, the metal was trading in the $1600 per ounce range. It promptly revisited the $1200 level instead.
* Goldman Sachs, at the end of 2013, predicted gold would fall to $1050 an ounce in what it called the “slam dunk sell for 2014.” Gold at the time was trading in the $1200 per ounce range. Gold promptly jumped to nearly $1400 per ounce in the first quarter of 2014 and is trading in the $1300 range as this is written — roughly 25% higher than Goldman’s prediction.
* Similarly, Credit Suisse predicted in May of last year that gold would get “crushed” and drop to $1100 per ounce by the end of 2013. Gold did hit $1200 per ounce shortly thereafter, but turned around to trade back at the $1300 level by year end. In that same forecast, the bank’s Ric Deverall observed: “When gold is going up, it looks like a great idea to buy more gold. And when it’s going down, do you really think risk-averse central bankers are going to try and catch the knife? No.” The jury is still out on whether or not China’s secretive central bank endeavored to catch the falling knife in 2013, but central banks in general did purchase 368 tonnes — down from 2012′s record year (545 tonnes). Contrary to Deverall’s assertion, central banks do buy gold when the price is falling.
The first lesson to file for future reference is that major banks with huge balance sheets and big-name consultants do not necessarily have a better crystal ball on the gold price than anyone else. The second is that, when it comes to gold reporting, one should not accept as gospel everything one sees or reads in the mainstream media. Its traditional anti-gold bias bleeds from its pages, so to speak, and should be taken with a grain of salt.
The mainstream media, for whatever reason, continues to believe that it can scare potential gold owners away with its consistently negative coverage, but as a recent Gallup Poll suggests, such tactics no longer work all that well. That poll ranks gold the second best option among long-term investments behind real estate and tied with stocks.
What makes gold’s poll performance interesting is that it reflects public opinion on gold after a more than two year decline that began in 2011 and at a time when real estate and stocks have enjoyed strong performances. In 2011, after ten straight years of annual gains, the public ranked gold the number one investment. Prior to 2011 gold was not included in the Gallup survey.
Polls notoriously reflect the ebb and flow of public opinion and for gold to still rank second after a two year drought indicates a swing in the public’s long-term attitude toward gold. The very fact that Gallup chooses to include gold in its annual survey speaks to a gain in stature since the secular bull market began in 2003.
Of the sample, 24% named gold the top investment and 24% chose stocks. Real Estate topped this year’s poll at 30% and bonds, perennially the least popular long-term investment, again finished last at 6%. When broken down across the political spectrum, gold was named the top investment by 26% of Republicans, 25% of Independents and 10% of Democrats. By contrast, stocks were named first by 26% of Republicans, 19% of Independents and 30% of Democrats.
