“David, I think your summary of the conditions currently prevailing in the gold market is absolutely spot on! The Goldman Sachs' trumpet call for $1,050 gold by the end of 2014 seems to have been as much to its investment bank peers as its clients. Furthermore, the ominous part is now the calendar consideration. Can December bring fruition to Jeffrey Currie's long-heralded forecast? It doesn't take a lot of ingenuity to suggest that a failure to pass of Sunday's Swiss Gold Referendum - currently the most likely outcome - might supply the necessary fodder for a further bear raid, supposedly justified by the fact that gold has now been discredited by the nation that has historically been most supportive of it? These may sound like cynical words, but until the pricing mechanism is actually driven by physical (even though backwardation now exits 6 months forward in the futures market), rather than the (GS) house of paper gold, it's difficult to imagine where these shenanigans end, short of an actual exchange failure to deliver physical. The wave of recent euro central bank requests for gold repatriation (first Germany, then the Dutch and now France's Marie Le Pen is on the case) seem to be adding to the apparent concern that physical availability may not be all that meets the eye. So, I wonder if it is a case of fasten your seatbelts for one more GS-inspired descent on their proprietary gold big dipper, before market fundamentals borne out by the real level of physical availability are able to assert themselves? Kind Regards,”

David Fuller's view

Thanks for your summary and interesting questions. 

Gold has long been a subject of fascination for many of us, and will no doubt remain so.  After all, it has been hard money for centuries, unlike the paper stuff where central banks are unhappy unless the purchasing power of their currencies, not least the favoured US Dollar, is depreciating by at least 2% a year. 

However, until gold comes back into form beyond a technical rally, evidenced by a medium-term uptrend that is outperforming the DJIA, I want my financial assets to be mostly in stock markets.  My two favourite destinations for investment capital remain India and China.