Some analysts and investors are claiming that the price of gold may have peaked slightly over $1,500. Some are walking their talks too, and are starting to liquidate their investments in gold, particularly over the last couple of weeks.
Most notably we have George Soros, a long standing “gold guru,” who sold almost one billion worth of gold bullions and coins.
So has the price of gold peaked?
Personally I don’t think so.
First of all we need to differentiate between investors getting scared or uncertain about gold, which is caused by seeing other investors (especially high profile ones like George Soros) liquidating their assets suddenly, from investors believing that the price of gold is really above what it should be according to the macro-economic context.
In my opinion the first scenario is happening this month. Economic data coming from the US and some Euro countries is not looking that good, so investors, when in doubt, are liquidating their assets, gold included.
The value of gold should only be strengthened by the uncertainty in those economies, and especially by the uncertainty in the exchange market. If you check how currencies are behaving against the gold you’ll notice that are quite volatile lately.
Second, demand for gold hasn’t decreased lately. In fact Asian demand for gold bars and bullions is stronger than ever. In Shanghai and Hong Kong dealers are paying a premium of almost $5 on top of world prices.
Another point to mention is that despite liquidating almost one billion in gold assets, George Soros still has many investments in gold, gold mines and gold stocks. So his recent move is probably just a portfolio adjustment rather than a desire to get out of the gold market.
Summing up, while the price of gold might remain below the historical $1,500 mark for a while, I think it will pass it again some time in the future. So no, the price of gold hasn’t peaked yet.