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
April 16, 2014 -- Updated 0946 GMT (1746 HKT)
It was supposed to be a class trip to a resort island. Instead, the ferry capsized, turning the afternoon into a deadly nightmare.
April 15, 2014 -- Updated 2212 GMT (0612 HKT)
From giant zippers to buttock-shaped balloons, Jun Kitagawa's public art is whimsical, erotic and playful.
April 16, 2014 -- Updated 0843 GMT (1643 HKT)
Ukraine says it's forces have regained control of an airfield from Russian separatists. Nick Paton Walsh reports.
April 15, 2014 -- Updated 1702 GMT (0102 HKT)
Katrina Karkazis
Romance is hard, for anyone. For people with intersex traits, love poses unique challenges.
April 15, 2014 -- Updated 1851 GMT (0251 HKT)
Sky gazers caught a glimpse of the "blood moon" crossing the Earth's shadow Tuesday in all its splendor.
April 16, 2014 -- Updated 0530 GMT (1330 HKT)
An "extraordinary" video shows what looks like the largest and most dangerous gathering of al Qaeda in years.
April 15, 2014 -- Updated 1624 GMT (0024 HKT)
Oscar Pistorius didn't consciously pull the trigger the night he shot and killed his girlfriend, the sprinter testified at his murder trial.
April 14, 2014 -- Updated 2116 GMT (0516 HKT)
Officials are launching their next option: an underwater vehicle to scan the ocean floor.
April 15, 2014 -- Updated 1254 GMT (2054 HKT)
A mysterious new artwork has appeared in Cheltenham, where Britain's version of the NSA is located.
April 15, 2014 -- Updated 1523 GMT (2323 HKT)
Like many parents across Liverpool, the McManamans waited. 25 years ago, it was all they could do.
April 15, 2014 -- Updated 1324 GMT (2124 HKT)
The Maltese Falcon makes a swift turn while at sea.
How do you design a superyacht fit for the billionaire who has everything money can buy?
April 15, 2014 -- Updated 1548 GMT (2348 HKT)
Pop art condoms in Kenya
Packaging can change how people see things. And when it comes to sex, it could maybe help save lives too.
April 15, 2014 -- Updated 1542 GMT (2342 HKT)
mediterranean monk seal
Africa is home to much unique wildlife, but many of its iconic species are threatened.
April 15, 2014 -- Updated 1509 GMT (2309 HKT)
A staff stands next to the propellers of Sun-powered plane Solar Impulse 2 HB-SIB seen in silhouette during its first exit for test on April 14, 2014 in Payerne, a year ahead of their planned round-the-world flight. Solar Impulse 2 is the successor of the original plane of the same name, which last year completed a trip across the United States without using a drop of fuel. AFP PHOTO / FABRICE COFFRINI (Photo credit should read FABRICE COFFRINI/AFP/Getty Images)
This solar-powered aircraft will attempt to circle the globe next year.
April 14, 2014 -- Updated 1156 GMT (1956 HKT)
Most adults make the mistakes of hitting the snooze button and of checking emails first thing in the morning, writes Mel Robbins.
April 16, 2014 -- Updated 0043 GMT (0843 HKT)
Ebola victims usually come from remote areas -- but now the lethal virus is in a city of two million.
April 15, 2014 -- Updated 1340 GMT (2140 HKT)
Browse through images you don't always see on news reports from CNN teams around the world.
ADVERTISEMENT