After a long season of doldrums, the gold market finally began to show signs of life over the course of last summer. Gold prices had barely moved from a decade low of around $1,100 at the end of 2015 to $1,300 by early 2019, an anemic annual growth rate of 5% compared with 12% for the S&P 500 index.
When gold climbed to $2,000 in the early months of the COVID-19 lockdowns, gold bugs begin to celebrate their redemption and end of the wilderness years. But it was the sound of one hand clapping. Gold stumbled and has languished for months in the $1,700s. The metal has been pronounced dead.
For all those who would say that gold’s ancient reign is over, I’d say you haven’t lived long enough. And neither has bitcoin, a parvenu rival as an alternative currency. Gold is failing to perform today despite widespread evidence of inflation because gold is the perennial risk-off asset. We are still in the euphoric haze of peak risk-on sentiment. Gold is a store of value, the protection against the nightmare of currency debasement that gold bugs fear so much.