Neither industrial metal nor an official currency, the gold commodity is an asset investors have come to either love or hate.
The yellow metal is trading near $1,430 an ounce, down 25% from a record high of $1,920 in September 2011.
More hedge funds are selling short the yellow metal while other investors are getting out of their long positions. Holdings in exchange-traded funds backed by gold bullion are at their lowest level since July 2011, according to Bloomberg.
But Blackrock, the world’s largest money manager, is still buying gold, according to its president Robert Kapito and billionaire John Paulson continues to stick with gold despite a 27% loss in his gold fund in April. His company is the biggest investor in the SPDR Gold Trust (GLD). And gold demand in China and India is still strong.
Brian Sullivan, host of Talking Numbers, a joint production from Yahoo! Finance and CNBC, tells The Daily Ticker that gold is having a hard time because it has no industrial use and traditionally weakens when the dollar strengthens, which is the case now.
“Gold as an asset class that doesn’t give you anything,” Sullivan says. “Try selling it…Gold is not a liquid asset except for the ETF…and that’s too easy to sell when people feel they’ve made their money.”
Moreover, says Sullivan, gold, like other assets, tends to fall much faster in price than it rises. Sullivan says his special guest on Talking Numbers Dennis Gartman has “a very negative call on gold.”
The founder and editor of The Gartman Letter tells Sullivan on Talking Numbers that "buying gold in dollars has been horrifying," but buying gold in Japanese yen is a different story because the yen has depreciated sharly against the dollar. "If you have been short gold and long an equal dollar amount of yen, it’s been a wonderful trade,” says Gartman.
Sullivan’s advice to investors: “Look at a 20-year chart for gold and make the decision yourself. I think it’s still very inflated.” The average price of gold in 1993: $360 an ounce.
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