Gold: The New Normal

Credit Suisse published a report – Gold: The Beginning of the End of an Era – back in February. The basic thesis was that the peak of the fear trade has now passed and that against any sensible benchmark gold still appears significantly overvalued relative to the long run historical experience. Its important to keep the bigger picture in mind before you rush to buy the dips.

Here are some charts from the same report.

Long run gold price, real, 2007 dollars

The real price of gold (2007 dollars) remains at an extreme level

Gold is still near the long run highs in terms of base metals

Is gold really an inflation hedge

Gold is trading 3 standard deviations below the exponential trend


TL;DR: gold is expensive, has broken its uptrend and is a poor inflation hedge (in terms of USD).

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