Spot gold was on a losing streak recently as growing investor optimism on the outlook of the US economy revived risk appetite.
Gold doesn’t provide investors with a return, and if anything, large institutional holders incur storage costs for owning physical bars.
Therefore being overexposed to gold during periods of economic prosperity and risk appetite isn’t always the most logical choice, especially because investors could obtain higher returns by owning alternative asset classes such as shares.
The 20-year gold cycle that started in 2000 is now midway, and with the threat of QE3 and currency debasement fading with every strong US data point, the precious metal can be expected to underperform from hereon – unless of course there are exogenous shocks that revive the spectre of QE.