The Gold Rally Shows Its Age

Gold is sending investors a mixed message. The metal gained 10 percent in 2011, marking its 11th consecutive annual gain, its longest winning streak in at least nine decades. Yet after closing at a record $1,900.23 an ounce on Sept. 5, it plunged, finishing the year at $1,563.70 an ounce, down 18 percent from the high.

Professionals are taking widely divergent stances on the gold rally, which has seen prices rise sixfold since 2001. George Soros, the billionaire who two years ago called gold the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter of last year, Securities and Exchange Commission data show. Hedge fund manager John Paulson also sold gold last year. The median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 37 percent, to $2,140 an ounce this year. “Gold is going to go higher, but it’s not going to go in a straight line,” says Martin Murenbeeld, the chief economist at Toronto-based DundeeWealth, which manages Dynamic Mutual Funds. “Gold has given positive returns, but it doesn’t necessarily do it in the way that gives comfort, and that makes people nervous.”