James Moore: Gold rush may be over as steep price dive sees the metal lose its lustre

Outlook: Since hitting a high on 6 September, the gold price is now off by 20 per cent. The silver price has slumped nearly 50 per cent

It's not glittering any more and we shouldn't be all that surprised by the end of a gold rush that will see casualties, good and bad. It seems that the modern day gold rush could at last be coming to an end, at least for the moment. Long touted as a "safe haven in times of trouble" by excitable commentators who really ought to know better, the commodity has lost its lustre in recent weeks.

The price has taken a steepdive and since hitting a recordhigh on 6 September is off by fully 20 per cent.

It wasn't grizzled old prospectors with battered looking pans who joined the rush that has gathered momentum over the past four years as the price was chased higher and higher. It was more sharp-suited hedge fund managers together with quite a few middle-class people desperate to get on to what they thought was a hot investment tip.

It will be interesting to hear what those peddling gold-linked securities and even savings accounts to those middle-class people are saying to them now. Given all the turmoil of the past few years it is astonishing that people still don't appear to have grasped the fact that investment bubbles tend to get popped.

The reality is that gold is anything but a safe haven. Like any commodity it tends to be highly volatile. Unlike other commodities, however, it has status of an investment class as well as a raw material. Which means its price has quite a bit more speculative fuel available to heat the price than its peers. Fuel that can also send it into a tailspin when withdrawn.

And withdrawn it has been. The fundamentals are no longer so friendly. Gold is not so much a safe haven as it is a hedge against inflation and a weak dollar.

Inflationary pressures in the US appear to be easing off and the dollar has been showing some strength. Despite the sour taste the Tea Party casts over US politics and its members' disgraceful behaviour in Congress, a lot of "safety money" has nonetheless been heading back to what has always really been its favourite place: the dollar and US Treasuries (even if the yield is pitiful).

Still, one side benefit of gold's recent slide could be to slow the relentless and rather depressing rise of the rather sleazy gold-buying industry, driven by pawn shop chains, which has made a mint by slyly offering what looks like a good price for things like unwanted jewellery when it is anything but.

Although given the way pawn shops have flourished in Britain during the recession, they might fancy chancing their arm at internationalising as the eurozone's politicians continue to wring their hands and duck difficult decisions putting the whole world at risk of a second, and much deeper, downturn.

Interestingly, despite another factor driving gold down being hedge funds selling up to cover losses elsewhere, the precious metal's fall is as nothing to the tumble taken by its sister silver, which is off by nearly a half since the start of the year. Copper has also taken a nose dive.

The latter two are far more influenced by the economic outlook than gold, given their use in a wide variety of industrial processes. It's not as if there aren't enough prophets of doom out there, but their decline is really rather worrying. It ought to concentrate minds.



Sorry Sergio, but the only way is down

Welcome, then Sergio Ermotti to the dubious honour of holding what could be the worst "big job" in banking. At least for the moment.

Mr Ermotti couldn't have enjoyed a much better start as he got his feet under his nice new desk. He has been greeted with a veritable "hurrah" from the markets as, having had the weekend to digest the news of his appointment, investors got stuck into the bank's shares while analysts filled the ether with lots of glowing comments about what a good chap Mr Ermotti is.

So perhaps he's entitled to a smile, at least for a little while. Because there won't be much time to smile in future.

After it seemed as if Mr Ermotti's predecessor Oswald Grübel had steadied a ship that was listing, if not sinking, UBS is once again in a mess thanks to the scandal that has seen charges laid against one of its traders, Kweku Adoboli.

Mr Ermotti, who is from the Italian-speaking part of Switzerland and is a former investment banker, presumably wants the job full time. You can understand why some might be reluctant to see another investment banker appointed to run UBS given the fact investment banking is what caused its biggest problems.

But, then, it probably takes an investment banker to fix an investment bank. Then, maybe, to shrink it. And given the markets' reaction yesterday to his appointment as acting boss, the bank's other directors ought to take heed.

The rather cringeworthy UBS advertising campaign uses the image of Everest conquerors Sir Edmund Hilary and Tenzing Norgay, gushing about their close relationship and how UBS uses that as the model for how it wants to deal with its clients.

Mr Ermotti's colleagues on the UBS board really need to be in close harmony given the state of the business they steward, but tensions have been slopping over into the media and that's not good.

So watch out Mr Ermotti. You've got a mountain to climb, my friend. And that's not such an easy thing to do if you have a bunch of people behind you who are keen to stick an ice axe in your back – as often seems to be the case in banking.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
Sport
footballBrighton vs Arsenal match report
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us