Skip to main content

Opinion: Is now the best time to buy gold?

By Jim Boulden, CNN
April 16, 2013 -- Updated 1605 GMT (0005 HKT)
STORY HIGHLIGHTS
  • Gold is considered a a safe haven asset and acts as a hedge against inflation
  • Boulden: Analysts say people who are selling gold are using the money to buy shares
  • All commodities are weakening at the moment; from oil to silver, writes CNN's Boulden

Editor's note: Jim Boulden is a correspondent for CNN's international programming based in London, where he covers a wide range of business and news stories. Follow him on Twitter.

(CNN) -- With gold prices officially in a bear market, investors must ask themselves if this is the time to buy?

I remember a gold bug telling me at the beginning of the gold bull market, around 2010, that gold would hit $2000, guaranteed. It never did.

Gold prices hit $1,888.70 in August 2011 and with Monday's big drop, it's now more than 20% off of that, even with Tuesday's slight bounce.

Why? It depends on who you ask. Some say it's the slowing of the Chinese economy. Some say it's a slowdown in actual physical gold sales in the crucial India market. There is even a worry that European governments, from tiny Cyprus to far bigger Italy, might flood the market by selling off state-owned gold to raise funds.

The only reason to speculate on the big price fall is if you care which way gold prices are heading now.

All commodities are weakening at the moment; from oil to silver. But gold is supposed to have that extra luster. It's a safe haven investment after all. It's a hedge against inflation.

And aren't we still in the midst of an economic crisis?

Not if you look at share prices. In fact, analysts say people who are selling gold (or, more accurately, gold futures contracts since few people take delivery of physical gold if it's only an investment) are using the money to buy shares. Stocks with dividends give investors the chance to make a bit of money no matter what the market is doing.

So, gold is not sexy anymore. If more people, or governments, decide to get out of gold, it will only go lower. Of course it has a long way to fall to get back to 1980s and 1990s when gold was under $500. Then it took off during the bubble years of the new century, only to gain even more traction as the much of the western world plunged into economic crisis.

Now, it's a time of high unemployment, recession and austerity. Funny that gold is also suffering, while stocks hit record or multi-year highs. When will investors move money out of stocks and back into gold? Or will it take a steep drop in gold, similar to oil in the 2008, to bring investors back into the market?

ADVERTISEMENT
Part of complete coverage on
November 24, 2014 -- Updated 0051 GMT (0851 HKT)
Where do hip young things hang out in Taiwan?
November 24, 2014 -- Updated 0118 GMT (0918 HKT)
The interior of the Formosa Boulevard Mass Rapid Transit Station in Kaohsiung, in southern Taiwan.
Stunning stations where your first priority won't be finding the nearest exit.
November 24, 2014 -- Updated 1043 GMT (1843 HKT)
A 30-year-old woman has been charged with attempting to kill a baby police say spent five days down a drain before being discovered by cyclists.
November 21, 2014 -- Updated 0121 GMT (0921 HKT)
If it wasn't for a comic's skit, Bill Cosby would still be America's favorite father, says expert.
November 21, 2014 -- Updated 1550 GMT (2350 HKT)
Obama orders the most sweeping overhaul of U.S. immigration in decades, prioritizing the deportation of "felons, not families."
November 18, 2014 -- Updated 2106 GMT (0506 HKT)
Fighters loyal to ISIS are now in control of Derna, a city on Libya's Mediterranean coast.
November 21, 2014 -- Updated 2319 GMT (0719 HKT)
China and likely other countries have the capacity to shut down the U.S. power grid, says the NSA.
November 19, 2014 -- Updated 1945 GMT (0345 HKT)
The founder of a U.S. nonprofit that works with returning soldiers is named CNN's Hero of the Year.
November 17, 2014 -- Updated 1738 GMT (0138 HKT)
A Syrian cleric condemns ISIS and its execution of U.S. hostage Peter Kassig.
November 18, 2014 -- Updated 1729 GMT (0129 HKT)
TV anchor wears the same suit for a year. Female colleague wears new outfit daily. Who gets criticized?
November 21, 2014 -- Updated 1204 GMT (2004 HKT)
Each day, CNN brings you an image capturing a moment to remember, defining the present in our changing world.
Browse through images from CNN teams around the world that you don't always see on news reports.
ADVERTISEMENT