Gold seems to have lost a bit of its shine in the last month with the bears outnumbering the bulls by two to one and pricing in a 15% fall.
Trading in options around the $54 billion SPDR Gold Trust, the world’s largest gold exchange traded fund, reveals that a growing number of investors believe that the price of the precious metal has peaked.
In December trading, the put to call ratio on the ETF reached two to one with some 80,000 contracts traded on December 20 alone.
Pete and Jon Najarian at market intelligence firm Optionmonster say: ‘Given the out of the money strike it does appear that this is an outright bet that gold will be trading back to [its] July low in the next three months. That’s a 15% decline from current levels.’
Doug Kass from US-based Seabreeze Partners told CNBC last week that he believes the gold price will ‘plummet’ by 25% in 2011 while investors should also expect regular intra-day movements of between $75-$100.
But the asset class continues to find favour among many high profile investors. Rothschild remains overweight gold on inflation fears, while hedgies John Paulson and George Soros continue to back the precious metal in a big way.
Even Howard Marks, the founder of hedgies Oaktree Capital, appears to be warming to gold.
‘It was about two years ago that I first noted the similarity between gold and religion. Before that I had always been a non-believer in gold (not strongly anti, just indifferent),’ he says. ‘But I concluded at the time- just as any wary agnostic might about God- that whereas I didn’t believe in gold, I couldn’t be certain that was the right position.’
But his primary concern that the asset is nigh on impossible to price accurately given that it doe not throw off cashflow remains.
‘Yes, gold is probably more likely to continue serving as a store of value than to quit,’ Marks says. ‘And yes, maybe one should have a position, but is this the right price at which to start?’
The number of bears may be rising, but there are still plenty of big name bulls. The only certainty is that someone will lose out next year.
