El-Erian: Why Gold Is Less Of A Haven These Days

Tyler Durden's picture

Authored by Mohamed El-Erian via Bloomberg.com, 

Its status has been eroded by unconventional monetary policy and cryptocurrencies.

Having waited patiently for the “any-minute-now” moment, gold investors are taking comfort from the recent rise in price in response to geopolitical tensions. Yet the responsiveness of gold, as well as the overall price, appears weaker than would have been expected from historically based models -- and for understandable reasons. The precious metal’s status as a haven has been eroded by the influence of unconventional monetary policy and the growth of markets for cryptocurrencies.

Gold prices rose almost 1 percent on Tuesday morning as part of the risk aversion triggered by yet another brazen North Korean missile launch over Japan, together with uncertainty as to how the U.S. may respond. But trading below $1,330, the overall response of gold prices to the last few months of heightened geopolitical risks has been relatively muted, particularly as the 10-year Treasury bond, another traditional haven, saw its yield trade down to below 2.10 percent that same morning.

Two immediate reasons come to mind, one related to several assets and the other more specifically to gold.

First, and as I have discussed in several Bloomberg View articles, the prolonged pursuit of unconventional measures by central banks has helped meaningfully decouple asset prices from underlying fundamentals. In such circumstances, historically based models will tend to overestimate the reaction of asset prices to heightened geopolitical tensions -- including the fall in risk assets such as equities, or the rise in gold.


Second, a portion of the traditional buyer interest in gold has been diverted to the growing markets for cryptocurrencies, which are also benefiting from a general increase in demand. As such, the returns to investors there have been significantly greater, sucking in even more funds.

The message for investors in both gold and multi-asset-class portfolios is clear.

While continuing to play a role in diversified market exposures, gold is less of a risk mitigator and asset-class diversifier, for now.

Luckily for investors, the need has also been less pronounced, given that ample market liquidity has boosted returns, repressed volatility, and distorted correlations in their favor.

But this is not to say that gold’s traditional role will not be re-established down the road. After all, central banks are in the later stages of reliance on unconventional monetary measures and, given this year’s spectacular price appreciation, cryptocurrencies are more vulnerable to unsettling air pockets.

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the_narrator's picture

The COMEX hasn't settled a gold futures contract in gold for a while now.  That's could be why the price is so low.

Thoresen's picture

I still have hope that the paper version will collapse allowing delivered gold price to explode.

nope-1004's picture

El Iranian shows a manipulated chart to back up his thesis.


Of course, if gold were used as God made available for inhabitants of this earth, El Iranian would have no job.

Money-changing prick!  All bankers lie, period.


The Black Bishop's picture

So what is the COMEX trade-ratios to these days? 200 buyers to 1 ounce gold? 300? Everyone -should- know the precious metal PAPER market is pure fucking ponzi.


The day the COMEX breaks is the day precious metals breaks OUT and UP by a mile. Digital currencies is a ruse and a banker instrument. And upgrade to classic fiat toiletpaper. Now you have digital toiletpaper that you cant even wipe your ass with.


The only positive is that we can still buy precious metals at what I perceive as HUGE discounts.

The Cooler King's picture

That's not gold (in the foto)...


Those are 'Acini de Pepe' which you use to finish off Italian Wedding Soup

eforce's picture

Gold is a lot like a lifeboat on the Titanic, few want it until it's too late and long gone.

robertsgt40's picture

Duh. What would we expect this sack of sht to say? The dollar is on its last leg? 

DWD-MOVIE's picture

I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

pods's picture

lol, you're killing me Smalls.

Everyone knows gold is a useless relic of a past age, so if you could kindly send to me for disposal...............


Blue Dog's picture

Heck, I'll even pick it up for free as a public service. Subject to certain terms and conditions like how much you have and how far away it is.

SWRichmond's picture

Gold bugs have known all along that the purpose of Bitcoin is to keep people from buying gold because they're running out.  Bitcoin is Plan B.

SWRichmond's picture

No, Bitcoin is Plan B for tptb.  Controlling gold wasn't working cuz they're running out so they launched their plan B, crypto-currencies

Honey-Badger's picture


Gold is as much as a haven as it ever was, just look at Russia and Chinese acquisition over the last 10 years if you want some evidence.

wulf's picture

Anyway, cryptos and precious metais are completely different types of entities.

Nothing has usurped gold for millennia as a globally-accepted medium of exchange or store of value, and I don’t think bitcoin will do so either. Gold can’t be altered. I don’t need to rely on a functioning internet. I don’t need a computer or electricity. Gold isn't a computer protocol that can be changed or "forked". There is not a "gold cash", "lite gold", or goldetherium.

I'm a X-generation that lives in Brazil. I'm still in my 30's but I saw lots of currencies die (cruzeiro, cruzado, cruzado novo, cruzeiro - again, and cruzeiro real). Storing foreign currency, real state, land, stocks, gold - real things - saved many people's wealth. Even in the Amazon jungle people will recognize gold and will accept it. It's not an abstract thing or too volatile.

Some people here mock "gold bugs" saying gold hasn't made them rich, as if that was the purpose of gold. Gold preserves wealth, and that's a lot in difficult times.

SeuMadruga's picture

Kudos, countryman ! And eventually gold'll save us again, specially brazilians, as their (our) current monetary base plus aggregates have already been bloated many fold since the relatively recent inception of the "Real" (BRL) in July/1994, date from which its compounded official devaluation already ammounts to over 85% for the money purported to have finally "tamed" chronic brazilian inflation (even when considering the present economic depression here).

tmosley's picture

>Last ten years

>not the last two years

Peanutz getting left in the dust.

strannick's picture

Pimco Bond King with bonds to unload..dissing gold. Ya don't say

MANvsMACHINE's picture

The only paper that will collapse is the US Dollar. When it does, the price of physical gold will explode. No one will be willing to buy paper gold at that point.

ET's picture

A Gold Coin in the hand is worth five hundred in the Comex bush.

Cryptos are nonphysical and are worth exactly that. Zero.

Get real assets to protect your wealth.

mayhem_korner's picture

El-Arian got the truck in reverse, trying to trip a dip. Got it.

Cynicles II's picture

oh, OK, I trust you. Going to flush all my gold down the toilet.

Cast Iron Skillet's picture

that's ... a different type of boating accident ...

strannick's picture

So he's saying banks manipulate prices and now there's cryptos .

Thanks. Duh.

Iskiab's picture

Gold will have value, but I'm not sure if I agree about cryptocurrencies being a substitute. It makes logical sense, but with the proliferation of cryptos these days it's acting more like a bubble than a hedge.

Gods's picture

Not sure on this it could become a thing in life at that point the price will be unbelievable.

MANvsMACHINE's picture

Right now, I can settle a debt with someone using Bitcoin.

White Devil's picture

I can settle a debt with a crowbar or a 9mm, completely off the grid.

SeuMadruga's picture

And I just settled a debt with a relative through GoldMoney.com !

ET's picture

Crypto is a ledger that can be tracked by the powers that be. They are not coins and despite the Gold imagery used they are not Gold.

When they show excitement for it in pursuit of the cashless society, the time is running out to get Physical Gold and Silver.

DogeCoin's picture

Gold's traditional role will be re-established when we get rid of the futures market that sells gold they don't have to people who don't want it and can't afford it.

ReturnOfDaMac's picture

That would be around the year 2035~2040.  Some of us have to make some scratch in the meantime

Grave's picture

currency backed by metals is completely useless and always fails.

the only way metals are useful is if the native coins are circulated in the economy.

it's not actually possible for this to happen unless civilization devolves back to the dark ages because metals have awful granularity and high friction in use.

due to this, they've already failed as a currency in modern society, every time

Gods's picture

yeah I put a few G's in litcoin and ethrum got to say I am impressed with the growth.

mayhem_korner's picture

Please tell us that "litcoin and ethrum" aren't your pet names for your left and right testicles. 

MANvsMACHINE's picture

I can't find litcoin or ethrum listed on coinmarketcap.com.

Must be his testes.

subversion's picture

Gold as an investment? Its security is what interests me.

Better to own precious metals than slips of paper that say you own them.

Pleb_From_Windsorstan's picture

Shilling for the establishment.

FreeShitter's picture

Wish low I.Q morons like this fuck would stop comparing metals to cryptos. They dont compete with eachother like everyone thinks. Diversification is always best when it comes to parking your money. Rental properties, SOME crypto, some metals, some land, some weapons, some night vision gear, lots of ammo, water purification, learn to grow your own food.....and detach yourself from the system as best as possible. 

AlphaSeraph's picture

I agree that they are more complimentary than they are adversarial, but one does take away the demand from the other to a certain degree.  

SeuMadruga's picture

Considering the unbelievable, mind boggling expansion of both base and multiple (Mx) fiat-monies worldwide specially since 2009 together with the still relatively minuscule marketcap for all cryptocurrencies combined, plus the most blatant pm's price manipulation through futures contracts and other criminal ruses/schemes, I guess that degree is "virtually" zero...

Raffie's picture

Like comparing a chocolate bar with a Hitler mellon.

Seasmoke's picture

Fuck this Mohamed too.

silverserfer's picture

nothing worse than a muzzzie who thinks hes a Jew.

AlphaSeraph's picture

WTF happened to the article about that Jap who said Hitler had the right motives? Triggered too many people?