Is Gold Really A Safe Haven?
Take a look at the gold chart, courtesy of Reuters, showing the price of gold since the early 70's. The funny thing about this chart though is that there is no real up and down about it. You can see that it rose in the early 80's fell back and then continued at a relatively stable level all the way through to the early 2000's then took off. It all seems a little strange when you consider that Gold is seen as a 'Safe Haven' in times of turmoil.
You can make the safe haven argument for the 20 year period during the 80's and 90's as there are small rises and falls indicating people coming in and out. However since the start of the millennium the price has gone up and up with no real pullback other than the start of the 2009 bull run.
Now, if it was a safe haven you would have expected a spike in the in the early 2000's, being an inverse relationship with the equity market over the same period . You can see this in the late 80's/early 90's coinciding with the property crash and recission of that time.
What we actually see is something quite different and which looks suspiciously like a bubble. I recently saw a guy on the Today show telling me that Gold would hit $5,000, presumably from this report from Standard Charter based on the assumption of a supply shortage. However with any bubble a supply shortage is almost always followed by oversupply as companies/people look to cash in on the high price. Its also worth remembering that most big predictions rarely come to fruition, just ask James Glassman!
If it is headed to $5,000 my wife better hide the jewelry as I will be cashing in!