seekingalpha-The SP500 has provided much higher returns than Gold over the last 53 years. Rising interest rates are Kryptonite to Gold. Gold is losing its safe-haven status for investors – for the first time in history investors have a viable alternative to Gold. The current secular trend favors soft assets over hard assets. We’re back … and more bearish than ever on gold!
We have been bearish on gold since October 2011 when it was trading at $1,800 (see our article published in 2011 Gold on the Verge of a Major Collapse). We then revisited the topic in January 2017 with another bearish article Gold is Dead, in which we forecast gold dropping to $700. But the prospects for gold are far worse than we imagined back in January. We now see gold dropping to the $300 over the next five to seven years. The fact is that gold is losing, and will continue to lose, it’s safe- haven status for investors, financial institutions, and central banks. The shiny metal will eventually be swept into the dustbin of financial history and be relegated to its original purpose: jewelry and idols. The False “Value” Analogy First of all, we want to address a false analogy that was used by many commentators in response to our January 2017 article: that gold holds its value over time better than any fiat currency because inflation eats away at the value of all currencies. An example: would you rather have received an inheritance of $1,000 in US $100 bills or $1,000 in gold in 1964? The argument in favor of gold states that gold is the preferred inheritance because it would be far more valuable today than the $100 bills. The argument is presented as follows: $1,000 in gold from 1964 would be worth $34,710 today (in 1964 $1,000 would have bought 28.28 ounces of gold at $35.35 per ounce. Current value = 28.28 x $1,227) The argument then follows that the $1,000 in US $100 bills would only be worth the equivalent of $128.00 today because of the negative effect of inflation on the (annual inflation was 3.96% over this period)