2013: Tipping point for gold?

As any trader would believe the price has all the information. But, if one were to look the gold price action during the last twelve months (in dollar terms), it raises many eyebrows while the other side of the camp people are (still) bullish, making the market for yellow metal ever more interesting.

Having risen consecutively for eleven years, gold price performance is one of the best among other asset classes, generating 17.97% CAGR. Will gold be able to generate a positive return in the year 2013? That's a million dollar question! But, the market is already signalling something for each one of us.

With too much money flooding the system from the global central banks, the government across the nations are trying to cure the symptoms rather than the disease. The call for gold standard gets louder now-a-days than ever amid prevailing negative interest rates.

In an era where business cycles are determined every four to five years as new governments get elected, it is prudent to follow tactical asset allocation if one has to financially survive. The financial world has evolved far more complex when compared to last few centuries, where precious metals are truly a safe haven. This position was taken over by the so called reserve currencies of the world and history has recorded it all for us - from Deutsche Mark to British Pound to US Dollars. And, hence if USD or Euro fails, there shall be a catastrophe, but financial pundits of modern world would soon be able to identify the next safer haven - be it Swiss Francs or Singapore Dollar.

This transition has already begun as big Swiss banks now started charging their clients for parking their cash deposit in Swiss Francs. This along with other controlled measures by the central bankers to curb gold demand with a prime objective being to shore up confidence in the monetary and banking system, bullion in all probability will not be a free market. As bullion derivatives market is far larger than the size of physical metal, a small trigger is sufficient enough to create a big impact.

Does all these lead to confiscation of gold - may be? Does that mean gold's stature has changed forever? No, it cannot be. In a fight between real and paper assets, what is real, always stays real. But, given the phenomenal price action, it is time for gold to take some breather and will fall on its own weight. And in the fight between global central bankers and the real assets, gold may lose the battle to win the war.

Wish you and all your loved ones a Very Happy and a Joyous Holiday!