Commodity Online Poll: 93% Investors Believe Gold will Fall

21 April 2010, 10:49 a.m. EST
By Rutam Vora
Of Commodity Online


(Commodity Online) -- At a time when gold prices reeled under pressure, for a sustained period after hitting their all-time high in December 2009, the perception towards the yellow metal seems to have reversed with investors hinting at weakening of gold prices in the near future and strengthening of other investment avenues.

When gold started rising during the last few months of 2009, it increased hopes of further upward rally in the prices. But the current global economic scenario, where equity markets started showing signs of strong and steady recovery with the emergence of alternative investment instruments like crude oil and other precious metals, the healthy returns in gold seemed to vanish, so did the interest of people from gold investments.

In an online opinion poll conducted by Commodity Online, a majority of the respondents have hinted at a possible fall in gold prices in the near future, and better earning opportunities will come knocking on the door.

In an online poll of a sample size of 21,600 respondents selected from across the globe, 93% or 20,100 of the total sample size had opined that there would be a fall in gold prices due to a recent upbeat mood in the global equity markets, while only 1,400 respondents contradicted the stand, 0.46% did not comment on either side. This showed that most of the respondents believed that there would be a fall in gold prices in the near future due to a recovery in global equity markets.

However, with regard to the other metals being an investment destination, most of the respondents maintained a view that they (base metals) can potentially become alternative investment instruments. As many as 64.35% of respondents considered base metals as a potential investment instrument but of them, 53% still chose gold as a preferred investment instrument compared to base metals, while 46.76% preferred base metals to gold.

The global economy is recovering with rapid pace and the risk appetite of the investors are prompting them to undertake higher risks involved in investment instruments other than gold. This would inevitably result in a reduced gold demand thereby pulling down gold prices. However, 52% of the respondents did not agree to the argument that increased risk appetite will bring down gold prices.

Similarly, of the total respondents as many as 53.1% believed that the US dollar would replace gold from its status of ‘safe haven.’ Looking at the recovery of the US economy from the nightmarish recession which had started from the US and hit the world economy in 2008, the dollar was found gathering steam once again. However, 46.8% of the respondents contradicted the view and maintained their skepticism towards the dollar and put gold to their preferred investment mode.

However, when asked if gold would start booming once again with a US dollar rally coming to an end soon, the respondents were, surprisingly, evenly divided into two parts with 50% of them supporting the motion and 50% opposing it.

It can be, thus, derived that the current upheavals in currency markets and rapid recovery in equity markets have left investors dazzled as to choose gold or other investment instruments for sustained returns on investments. However, the poll clearly suggests that gold has maintained its unique characteristic of store-of-value but somewhere it has failed to yield expected returns in the short run.

The recent recovery in the equity markets has put a diversion to the investors’ preference towards gold as a preferred investment instrument; hence it can be derived from the poll analysis that gold has its value for long-term investments and not specifically for the short-term gains. When the yellow metal, hit the all-time high of USD$1,227 per ounce in December 2009, had fuelled investor sentiments in short term, but the uptrend lost its pace when alternative investment avenues, like dollar, metals and crude started getting rosy once again.

By Rutam Vora Of Commodity Online