Gold was one of the worst performing investments in 2021, declining almost 4% in September alone. Rising bond yields and a stronger US dollar in the third quarter were headwinds for gold prices. While gold is still seen as a hedge against inflation over the long run, its appeal as a safe-haven asset and inflation hedge have diminished recently due to expectations that the Fed will taper its monetary stimulus. However, if inflation proves more persistent than expected, demand for gold could rise again as an inflation hedge.

1. Gold Among The Worst 2021
Investments

2. Points To Be Discussed Today:
• Gold As An Investment In 2021
• The Gold Bugs
• Gold’s Value Could Skyrocket
• Gold’s Persistent Slump
• Will Q4 2021 Be Better For Gold?
• The Price Of Gold Declined Almost 4% In That
Month

3. Gold As An Investment In 2021
• In light of gold’s (GC=F) flash crash on Monday,
with the commodity dropping to its lowest price
since March at $1,730.13 an ounce in New York
by late afternoon, some investors may be
growing wary about its efficacy as an inflation
hedge in the near term.
• According to J.C. Parets, Allstarcharts.com
founder and chief strategist, gold has become
one of the worst investments over the past year.

4. The Gold Bugs
• “Nobody wants your rocks, right?
• I mean, that's the theme … the gold bugs have
come up with every story under the sun as to
why gold should go up, and it doesn't,” Parets
told Yahoo Finance Live.
• “In fact, over the last year, you’d be hard
pressed to find a worse investment over the
last year [than] gold.”

5. Gold’s Value Could Skyrocket
• As inflation reaches the highest levels seen
since 2008, gold prices have fallen over 16% in
a year — down over $300 from an August
2020 peak of $2,069 per ounce.
• Just a year ago, institutions like Bank of
America (BAC) projected that gold’s value
could skyrocket to as much as $3,000.

6. Gold’s Value Could Skyrocket - I
• “I mean, literally, you could have bought
anything and it would have made money but
not gold, you know, so it just really is the
worst of the bunch,” Parets added.
• “And even in commodities, literally every
commodity in the world is going up, except for
gold.”

7. Gold’s Persistent Slump
• Indeed, futures on other commodities such as
crude oil (CL=F) and natural gas (NG=F) have
demonstrated strong rebounds from
pandemic-era lows, while precious metals like
gold, silver (SI=F), and platinum (PL=F)
continue to struggle.
• According to Parets, the reason for gold’s
persistent slump is simply low demand in
conjunction with growing supply.

8. Gold Eventually Returns To Last Year's
Highs
• Until market conditions for gold improve,
Parets noted that he is going to steer
clear from investing in bullion.
• However, he is confident that gold
eventually returns to last year's highs.

9. Gold Eventually Returns To Last Year's
Highs - I
• “It's really a supply and demand game,” Parets
said. “Some people like to have conspiracy
theories about gold and [it being an] inflation
hedge, and [they’re all just] stories.
• And so you can listen to those stories, or you
can focus on the only thing that's actually ever
going to pay anyone, and that's the price of
gold,” he said.

10. Will Q4 2021 Be Better For Gold?
• The third quarter of 2021 was bad for gold, with a
particularly awful September.
• Could the remainder of the year be any better for the
yellow metal?
• September is believed to be, from the historical point
of view, one of the best months for gold.
• Well, September 2021 definitely wasn’t very good for
the yellow metal
• As the chart below shows, the price of gold declined
almost 4% in that month (from $1,814.85 at the end of
August to $1,742.80 at the end of September).

11. Gold Price In 2021

12. The Price Of Gold Declined Almost 4%
In That Month
• Actually, the whole third quarter was rather
disappointing for the yellow metal, which lost
1.15% over the last three months.
• However, it was still much better than the
disastrous first quarter of the year in which
gold plunged more than 10%.
• So far, the yellow metal is 7.67% down year-
to-date.

13. • But why did gold perform so poorly last month
despite elevated inflation and all the risks
present to the US economy?
• Long story short, rising bond yields and the
stronger greenback were the main
headwinds for gold in September and, more
generally, in the whole Q3 2021, as one can
see in the chart below.

14. 10 – Year Tips Yields & U.S. Dollar
Index In 2021

15. • In the first half of the year, the US dollar
performed rather poorly, but a more hawkish
Fed helped to revive the greenback and push
interest rates higher.
• In such an environment, any safe-haven bets
– amid the uncertainty about the debt ceiling,
debt problems in China, etc. – were channeled
into the US dollar alone.

16. • In other words, because of the expectations of
the Fed’s tapering, the recent risk-off
sentiment has benefited only the greenback,
not gold.
• So, gold’s appeal as a safe-haven asset has
diminished recently. The same applies,
actually, to gold’s status as an inflation hedge.

17. • To be clear, the whole issue is more nuanced. I
believe that gold still has anti-inflationary
features, especially when inflation is very high
and accelerating.
• I also think that gold will retain its purchasing
power over the long run.
• It might simply be the case that rising interest
rates counterweighed the reasons for investing in
gold during inflation, especially given that it
seems that the Fed convinced the markets that
inflation would only be temporary.

18. The Demand For Gold As A Hedge
• However, if inflation turns out to be more
persistent, the Fed could find itself behind the
curve, while the real interest rates could stay at
very low levels.
• In such a scenario, the demand for gold as a
hedge against inflation could rise again.
• As a reminder, there are many arguments for
high inflation staying with us for longer.
• Even Powell admitted last week that inflationary
pressure would run into next year:

19. The Demand For Gold As A Hedge - I
• It’s also frustrating to see the bottlenecks and
supply chain problems not getting better – in
fact at the margins apparently getting a little
bit worse (…)
• We see that continuing into next year
probably, and holding up inflation longer than
we had thought.

20. Gold Among The Worst 2021
Investments

21. THANKS FOR LISTENING
Gold Among The Worst 2021
Investments