Gold's prophet of gloom

As the precious metal loses its lustre, Dana Rubin asks whether it's all Andy Smith's fault

The ultimate gold bastion fell last week, but Andy Smith was not on the ramparts.

For the past 10 years the UBS precious metals analyst has been an unremitting bear on gold, the most forceful voice arguing that prices would continue down.

So when it was announced on 24 October that the Swiss government - the staunchest of gold defenders - might sell half its reserves, it seemed to confirm Mr Smith's message that gold is shifting away from its role as a backer of global currencies and becoming a simple commodity.

Gold prices plunged to a 12-year-low of $309. Even in a week when you might have expected investors to take refuge in gold, the price barely recovered; it was trading at $313 on Friday.

"It made me even more frenzied," the 43-year-old analyst says. "If everybody starts to agree, the idea is past its sell-by date. What do I look at now?"

The idea of an "even more frenzied" Mr Smith is hard to grasp. His breathless daily, weekly and quarterly reports read like madcap missives from a polymath professor. Packed with arcane allusions, they leap between history, literature and philosophy, quoting the likes of Shakespeare, the Marquis de Sade, Erica Jong, Henry James and the Tuscany tourist office.

Here's Andy Smith on gold prices: "In 1922, Ernest Hemingway described Switzerland as 'a small steep country, much more up and down than sideways'. The antithesis, in fact, of today's dollar gold price." And: "Assigning China sole responsibility for rejuvenating gold is an unfair burden, even for a billion shoulders to bear."

Not everyone is impressed. "People either agree or disagree, and when they disagree, they disagree adamantly," said Michael Simon, senior manager mining finance at MeesPierson.

The differing views reflect a larger debate about gold's function. Some say it will keep its traditional hedge role, but some - like Mr Smith - say it's in the process of being demonetised.

Recent history seems to support him. The Canadians, Belgians, Dutch and Australians have all sold off reserves in recent years. The Germans, Swiss and even the Americans are thinking about it.

There are also those who say Mr Smith's persistent bearish stance itself drives prices down. "I think there is some truth in that," says Ian Henderson, director of Fleming Investment Management. If the price were turning down anyway, then "the voice of a prophet pushing in the same direction" would only accelerate it.

And there are those who say that in pursuit of his overarching theme, Mr Smith loses track of the short term. "In the general trend, he's been right. In the absolute target, he's been wrong," said George Milling-Stanley, manager of gold market analysis for the World Gold Council in New York, the industry's trade group. "He misses opportunities for his clients to make money."

For instance, during the first quarter of this year, in an atypically bullish mood, Smith said gold would rally to $400. Instead it went to $320. A year ago, he predicted it would go below $300. That hasn't happened yet.

Mr Smith, the son of a postman and a seamstress, studied economics at Reading and LSE and then spent 10 years as an economist for the British civil service, for Consolidated Goldfields and for BP before joining UBS in 1988 as a commodities analyst. After a year, he offered to specialise in gold.

How does he keep it up? "I read and read and read," he says. In his spare time, he swims, jogs, lifts weights and sleeps five hours a night. Oh yeah, he's also married with two children, aged 10 and 12.

Copyright: IOS & Bloomberg

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future