Gold Price Crash or 20 year Bear Market?

I attach graphs for gold price and the CPI. Gold at 1600 is twice the 800 it was circa 1980. CPI was 80 back in 1980 but is nearly tripled now to 240.

ln(1600/800)/(2013-1980) = ln(2)/33 = 2.1% return on gold per annum
ln(240/80)/(2013-1980) = ln(3)/33 = 3.4% inflation rate per annum

So gold is not keeping pace with inflation. Some Billionaires have already sold off a lot of their gold. Is it time to sell all gold? Will it be a crash or another 20 year bear market?

http://www.bloomberg.com/news/2013-02-14/billionaires-soros-bacon-reduce-gold-holdings-as-prices-slump.html

Billionaire investors George Soros and Louis Moore Bacon cut their stakes in exchange-traded products backed by gold last quarter as futures dropped the most in more than eight years. Soros Fund Management LLC reduced its investment in the SPDR Gold Trust, the biggest fund backed by the metal, by 55 percent to 600,000 shares as of Dec. 31 from three months earlier. Bacon’s Moore Capital Management LP sold its entire stake in the SPDR fund… The fourth-quarter decisions may bolster speculation that gold’s 12-year bull-run is coming to an end as economic data from the U.S. to China show signs of recovery, curbing haven demand.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s