The abysmal performance of gold and gold-related assets in recent years is one of the more curious investing tales of our age. For reasons impossible to fathom, the idea spread among certain European central bankers (most notably those running the Bank of England) that they had to sell off huge amounts of their nation’s gold reserves—reserves often acquired over centuries—in order to raise money to buy better paying assets like U.S. Treasuries.
This action, naturally, flooded the gold market and depressed the price of the metal at the same time that the Bank of England (BoE) was selling huge chunks of its gold reserves at regular two-month intervals. The BoE thus became one of the few public or private entities ever to consciously and systematically undermine the value of one of its biggest assets, while simultaneously seeking to benefit from selling that asset in a market its own actions had trashed.
A jolly good show by the boys at the BoE—some of whom will doubtless be rewarded with peerages for their efforts. Before they waddle off to the wigged dumboland of the House of Lords, however, it’s worth pondering what the rest of us can expect when it comes to gold and gold-related holdings. Their value will certainly soar when the BoE’s present round of selling ends next March. And perhaps earlier—much earlier—if the inflation lurking just beneath the market’s radar suddenly surfaces.
In the mid-nineteenth century Sir Arthur Hugh Clough wrote a wonderfully uplifting poem titled "Say Not The Struggle." Its theme was a call to look beyond present adversity and focus on the brighter future that lay beyond. For long abused gold investors, the following restructuring of that classic verse—"Say Not Your Gold Fund"—will perhaps also bring solace and the hope for brighter days to come. This poem, by the way, is taken from my new book, Songs of Wall Street: An anthology of verse for literary investors.
Say Not Your Gold Fund
Say not your gold fund naught a’groweth,
It lies there like a lump of lead,
Nor does it dividends off throweth,
Indeed, it looketh to be dead.
If shares are down, demand may be quick’ning;
It may be, in markets still conceal’d,
Gold buyers bounce from losses sick’ning,
And, hid from you, renew their zeal.
For while inflation, wildly racing,
Now seems a distant set of spikes,
The Fed, liquidity embracing
Seems headed down this same old pike.
So not by current price quotes only,
Do plan your trades, and set your goals;
The current state of gold is lowly,
But markets quake, and up she goes!
**********
© Michael Silverstein
|
