Gold prices fail to follow a neat pattern
Study finds no common pattern to recent spikes and cycles, reports Paul Taylor
FT.com site; Jul 14, 2002
There have been six gold price cycles since it hit an all-time high of $850 per ounce in January 1980. However, a study has found that there has been no common denominator to those subsequent price spikes.
Research by Straszheim Global Advisors, the US advisory firm, suggests that it is almost impossible for investors to anticipate a gold price rise such as the recent rally, which has seen the price rise from a low of $255 in April last year to $327 early last month.
"Gold prices have not followed normal business cycles, either here or abroad," says the report."Sometimes gold's attraction is its 'safe haven' quality. At other times, it is an inflation hedge."
The firm argues that the current gold price rise has been driven by geopolitical concerns and the potential for wealth destruction in equity and real as sets. Essentially this cycle is a"safe haven" effect.
The report contrasts the 2001-2002 gold cycle with previous cycles - 1999-2000, 1992-1993, 1989-1990, 1985-1987, 1982-1983. It notes that during the 1999-2000 cycle, when gold prices rose by 24 per cent between June and October 1999, equity prices were still rising sharply and the US economy was very strong. Similarly, during the previous gold price cycle, when gold rose by 22 per cent between March and August of 1993, macroeconomic conditions were solid.
The two biggest gold price spikes came in the 33 months ending in December 1987 when gold gained 71 per cent - apparently reflecting investors concerns - and in 1982-1983, when gold gained 67 per cent, driven by despair over equities, the economy and inflation.


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