Has the gold rush come to an end?
NEW YORK — When the price of gold plunged $200 last month, many people thought they caught the sound of the gold bubble popping.
What Peter Schiff, the CEO of brokerage Euro Pacific Precious Metals, believes what he heard was a stampede of fairweather speculators fleeing the precious metal.
Schiff and other champions of gold weren’t shaken by the plunge. To them it was just a short breather in preparation for another long climb.
All the reasons they give for buying gold haven’t changed: Gold remains a refuge from disaster, they say, arguing that a steep drop in the dollar and a spike in the price of consumer goods are a threat.
For speculators, buying gold was simply a way to profit from its popularity.
“That’s what happens in a bull market,” Schiff says. “The selloffs shake out the Johnnycome-latelies. It’s healthy. Now we can have a real rally.”
Gold, often touted as the most trustworthy of investments, has looked wild over the past month. After starting April above $1,600 an ounce, it dropped below $1,361 on April 15 and has steadily recovered to settle at $1,436 on Friday.
Gold was supposed to be a haven from turmoil. When the housing market started cracking and the stock market sank in 2007, the price of gold began to surge.
Over the next two years, it soared from around $600 an ounce to nearly $900 in the depths of the financial crisis in late 2008.
By 2009, speculators and others looked to ride gold’s popularity. Hedge funds and other big investors piled in.
Right after Standard & Poor’s stripped the U.S. of its top credit rating in August 2011, the price peaked above $1,900.
But now it looks like the fastmoney has soured on the yellow metal.
Hedge funds and big inves- tors pulled $8.7 billion out of gold funds last month, according to EPFR Global, a firm that tracks where big investors put their money.
The SPDR Gold Trust unloaded 12 percent of its gold in April, selling 146 metric tons.
There’s no single destination for all the money rushing out of gold, says Cameron Brandt, EPFR’s director of research. The most popular places for investors now are real estate funds, junk bonds, emergingmarket bonds and stocks in big companies that pay dividends. Some of that money appears to be trickling back into the U.S. stock market.
With banks looking stable and the economy slowly improving, there’s less of a need to hide in the gold market. Fear of another financial crisis has diminished.