Tags: Legland | gold | safe | haven

SocGen's Legland: Gold Has Lost its Safe-Haven Status

By Dan Weil   |   Tuesday, 24 Dec 2013 08:36 AM

Gold has often been viewed as a safe-haven investment in times of turmoil, but not this year, says Patrick Legland, a cross-asset strategist at Societe Generale in Paris.

"Gold lost its role as a safe haven against systemic risk in 2013," he writes in a commentary obtained by MarketWatch.

The precious metal dropped to a three-year low last Thursday, a day after the Federal Reserve announced a tapering of its bond purchases.

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The precious metal has dropped 28 percent so far this year. Legland lists several events that were unable to lift gold.

"The Italian elections, the Cyprus bail-in and even the U.S. shutdown and debt ceiling failed to drive gold higher," he explains.

"On top of that, financial markets began to anticipate the end of Fed QE [quantitative easing] in early 2013, and this maintained pressure on the gold price throughout the year, as the expansion of central bank balance sheets was considered to be a key gold driver."

And deflation risks should continue to weigh on the metal, Legland says.

QE pushed gold to vastly overvalued levels, and now it's going to keep dropping as the Fed tapers its bond buying, Scott Nations, chief investment officer of NationsShares, tells CNBC.

Gold is likely headed below $1,000 next year, he says. "I wouldn't buy gold with my worst enemy's money."

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