In a report published at the beginning of April, Société Générale analysts explained how a "perfect storm" of fundamental and macro factors could come together to precipitate a crash in the gold market.
One of the themes most central to the argument for selling gold this year is founded on expectations that interest rates will rise in 2013 and the Federal Reserve will begin to taper quantitative easing.
"Currency Wars" author and prominent gold bull Jim Rickards partly agrees, but he's bullish on gold because he doesn't see that happening.
Rickards told Business Insider:
What would make me bearish on gold, what would make me want to sell gold?
Well, if the President and the Chairman of the Fed came out and said, "We're going to raise interest rates, we're going to stop quantitative easing — in fact, we're going to reverse it a little bit — we're going to cut corporate taxes to zero, we're going to eliminate the capital gains tax, we're going to reduce regulation, we're going to make America a magnet for savings and investment. We're going to have an investment-driven model rather than a debt and consumption-driven model, and we're going to have positive real rates."
I would say, "Great. Sell your gold, or put it to one side, because gold is over."
But none of those things are true. Not one of those policies that I just mentioned is on the table.
In fact, the opposite is true. We're getting higher taxes, more regulation, more quantitative easing, zero interest rates as far as the eye can see.
For their part, Société Générale analysts wrote in a report published Friday, " After the yen, we are seeing the demise of gold, another asset that had performed very strongly through the financial crisis. What’s next? Treasuries, we think, but only when the U.S. economy picks up again this summer and the Fed exit talk heats up."
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- quantitative easing
- Société Générale