English: The old logo of Credit Suisse. (Photo credit: Wikipedia)
Gold
(GC : NASDAQ : US$1669.10)
? Credit Suisse published a noteworthy comment on gold Friday, “The Beginning of the End of an Era”.
Credit Suisse notes the past five years have been among the most tumultuous ever seen in global financial markets, with the collapse of Lehman Brothers in September 2008 unleashing a series of events without precedent since at least the 1930s. The financial underpinnings of the crisis, the potential consequences of the reflationary “fix”, along with the rolling financial issues in Europe, all contributed to an extraordinary flight to quality.
U.S. Treasuries and gold were among the clearest beneficiaries, with the precious metal enjoying a Renaissance period as its role as a financial asset was reappraised by central banks and investors. Given its historical role as a store of value, Credit Suisse says its not surprising that investor demand for gold increased substantially.
Now, however, with the acute phase of the crisis likely to be behind us, Credit Suisse believes the peak of the fear trade has now also passed. Despite the recent pullback in price, against any sensible benchmark gold still appears significantly overvalued relative to the long run historical experience. With global growth now improving and inflation expectations contained, Credit Suisse feels that downside risks are building for gold – it looks increasingly likely that the 2011 high will prove to have been the peak for the USD gold price in this cycle, and that the “beginning of the end” of the current golden era will come sooner than the Q3 which Credit Suisse had forecast in January.
