John Paulson is getting killed by it. George Soros is dumping it. Gold has turned into the dog of the global markets. Here’s a JP Morgan chart from a week ago of how various asset classes performed over the previous year:
Maybe investors are getting tired of waiting for gold to make another run higher. After a remarkable surge starting in 2008, gold has done a whole lot of nothing since September 2011.
Or maybe investors are tired of waiting for the gnarly hyper-inflation that the world’s central bankers were supposed to set off through their various iterations of quantitative easing, or money creation. In the US, where the Federal Reserve has been the most active in this respect, the surge in inflation is nowhere to be found. Even including volatile food and energy prices, US inflation has remained remarkably close to the target of 2%. It’s even been falling below that lately, to 1.6% in January.
We’re not trying to take anything away from anybody who won big by betting on gold. It’s still up 61% over the last five years. But it’s a trade that worked. Now it looks like it’s not working. And with big players such as hedge funds showing signs of getting out of the trade, retail investors who’ve been piling into gold would do well to take note.