Gold Out Of Style Like Bell-Bottom Trousers Signals Lower Prices

Greece Turmoil

Not everyone is heading for the exit. Bullion still has a place in portfolios as “insurance,” said Frank Holmes, a San Antonio-based money manager at U.S. Global Investors, which oversees $818 million. The International Monetary Fund said Monday developments in Greece remain a risk for the euro area and warned that authorities shouldn’t become complacent about the scale of the threat after the nation reached a deal with its creditors.

Physical demand can also help support prices. Sales of American Eagle gold coins at the U.S. Mint in July are heading for the biggest monthly total since April 2013. Buying has also increased at the Royal Canadian Mint, while Perth Mint Treasurer Nigel Moffatt told Bloomberg Television on Wednesday demand had surged since the price fell below $1,100.

“As an investor, you should have gold,” Holmes said. “There are lots of systemic risks out there.”

Hedge funds aren’t convinced. Speculators held a net-short position, or wagers on declines, of 11,345 contracts in the week ended July 21, according to the most-recent data from the U.S. Commodity Futures Trading Commission. That’s the first net- bearish outlook since the data begins in 2006.

Goldman Outlook

Analysts who’ve been right in the past are forecasting more losses. Goldman Sachs Group Inc.’s Jeffrey Currie, who told investors to sell before the 2013 slump, has said the metal could fall below $1,000. Oversea-Chinese Banking Corp.’s Barnabas Gan, the most-accurate forecaster of precious metals over the past two years based on rankings compiled by Bloomberg, predicts $1,050 by December.

More than $5.7 billion has been wiped from the value of global gold ETPs in July. Investors cut holdings for a ninth day to about 1,539 metric tons, the smallest hoard since 2009. They have been selling for three straight months.

“Gold is a weird relic of antiquity,” said Brian Barish, who helps oversee about $12.5 billion at Denver-based Cambiar Investors LLC. “It’s not a commodity that has much fundamental demand. It’s pretty, so people use it for jewelry. But it’s unlike iron ore or oil, or copper, or corn. There’s not specific end-use for it. People just like it, so it becomes a discussion about fervor.”