Measured against useful assets, 'sterile' gold is at 'multi-generation' high. Cash out now
Peter Tasker, a Tokyo-based analyst with Arcus Research, writes in today's Financial Times that the gold price has become "strangely insensitive to the usual stimuli" and that gold has become just another "risk on" asset that behaves just like stock markets or other investment classes.
In short, gold's special status as a safe haven in times of trouble has evaporated.
Therefore it should be assessed like any other investment – like internet stocks in the late 1990s or Japan in the 1980s.
Consider also, says Tasker, that all the gold above ground is now valued at more than the combined market capitalization of all German, Japanese and Chinese stocks "with all the productive capacity they represent" versus "sterile" gold.
If you treat gold like any other financial asset argues Tasker, then gold is firmly in bubble territory. More so if you measure the value of other commodities, assets or services relative to gold:
According to the website pricedingold.com, gold is at a 120-year high (at least) relative to US house prices.
Likewise, it is at a 74-year high relative to US wages, at multi-generation highs relative to wheat, coffee and cocoa and at the same price relative to the cost of a Yale education as in the first decade of the 20th century.
Tasker's argument is similar to that of trading floor executive-turned-lecturer (University of Boston School of Management) Mark Williams which elicited much discussion among gold bugs last year:
"Global stock markets are volatile, central banks have not regained credibility, inflation is still a concern, and trust in the markets has not been restored. Yet gold continues to fall… Gold has lost its shine.
"If gold is falling in a weak economy, and investors are willing to own US dollars again, imagine how it will perform when the global economy eventually moves from chaos to prosperity, and more traditional investments – those that produce products, dividends and jobs – come back in fashion."