King Midas lusted after it. The Incas worshipped it. Shiny flakes of it set off a 19th-century rush to California and ship captains never stop looking for it at the bottom of the sea. While gold has ignited passions for centuries, for today’s investors, it seems, the metal has been losing its allure.
After surging sevenfold during a 12-year bull market — a run matched by only a handful of assets, including U.S. Treasuries and stamps — investors sold it wildly in 2013. Another drop last year marked the first back-to-back yearly declines in 14 years. Is the epic boom and bust in gold just another market cycle or is it a change in human appetites?
Gold’s time-honored appeal as a haven from financial storms sent it to a record $1,921.17 an ounce in 2011. Investors sought safety from the threat of faster inflation and weaker currencies as governments expanded the money supply by buying bonds to stimulate flagging economies. As economic growth returned, stock markets rallied and the metal began to tumble. Bullion plummeted 28 percent in 2013, then slid another 1.4 percent in 2014.
The rout hurt holders such as billionaire John Paulson, producers like Barrick Gold and the biggest owners of gold, central banks. Investors sold as much from physically backed gold exchange-traded products in 2013 as they bought in the previous three years combined, and kept disposing. Interest in gold revived at times in 2014 as concern about slower global economic growth, an emerging-market sell-off and turmoil in Ukraine and the Middle East stoked demand for a protection of wealth. Gold remains down about a third from its peak, fueling the debate about the lessons of the metal’s spectacular fall.