Tags: Browning | gold | hedge | fear

WSJ's Browning: Gold Needs More Investor Fear to Keep Rising

By    |   Monday, 24 February 2014 12:28 PM

Gold's 11 percent rise so far this year stems from investor fears about sagging global growth and the Federal Reserve's tapering of its bond purchases, writes E.S. Browning of The Wall Street Journal.

Without a continuation of fear, gold may be unable to keep rising, he says. April gold futures traded at $1,334.70 an ounce Tuesday morning on the Comex, after reaching a 16-week high earlier.

"Among the myths [about gold are] that it is a store of value, a hedge against inflation or a hard alternative currency," Browning writes.

Editor’s Note:
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"Its behavior over recent decades suggests that it has been inconsistent in those roles. It has done better as something simpler: a bet on fear."

So if fear dwindles, gold prices could easily fall back, he contends. The metal plunged 28 percent last year.

"Gold goes up as an insurance policy and then it is sold at a loss when people no longer want insurance," Rhona O'Connell, head of metals research at Thomson Reuters GFMS, tells Browning.

While gold can gain a bit more in the short term, it's unlikely to rise substantially before 2016, because confidence about the economy is rising, she O'Connell explains.

For now, though, fear is helping gold, experts say.

"Fears about economic conditions in China and the U.S. are driving investors back into gold," Peter Fertig, owner of Quantitative Commodity Research, tells Reuters. "We would have to wait for data for the month of March to get a clearer picture about the state of the U.S. economy."

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Gold's 11 percent rise so far this year stems from investor fears about sagging global growth and the Federal Reserve's tapering of its bond purchases, writes E.S. Browning of The Wall Street Journal.
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2014-28-24
Monday, 24 February 2014 12:28 PM
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