The gold investment market that saw bullion top $1000 an ounce has lost much of its luster as the American dollar climbs against the euro. The same banks that promoted gold as a plausible investment since 2005 are now fixated on the simple truth; over the last 30 years gold has not delivered as a long term investment. For more on this, see the following article from Commodity Online.
Bullion analysts are having second thoughts about the metal’s power to sustain the bull run. As a result, several market analysts have revised their outlook for gold.
Take the case of National Bank of Canada, which has revised its forecast, following other researchers’ hint.
Since 2005, National Bank economists have promoted gold as a commodity likely to improve the performance of investors’ portfolios.
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However, despite the recent rally that propelled the price of gold to new heights, National Bank said it appears more and more clear that the time has come to revise investors’ position.
Weak US dollar has been a major driver of this year’s surge in the price of gold. However, the currency has recently been showing signs of stabilizing, and could be about to turn upward, National Bank said.
Following up with a research note, the bank said investors who dared place some of their eggs in gold in recent years have been nicely rewarded for what they did. However, the time has come now to revise their positions as signs of a global economic recovery start to emerge.
Headwinds are building against the price of gold. Risk aversion is gradually returning to pre-crisis levels and inflation fears should abate.
If the past 30 years are any indication, gold does not constitute an attractive investment over the long term. Moreover, in times of economic recovery, the return on gold falls well short of the return on the stock market.
Gold edged down below $990 an ounce on Monday as the US dollar rose versus the euro, prompting a liquidation of long positions in the market after bullion failed to stay above $1,000 an ounce.
This article has been republished from Commodity Online. You can also view this article at Commodity Online, a commodity news and analysis site.