Wasn’t the point of gold supposed to be to act as a safe haven in times of crisis? That is certainly how it seemed in the banking crisis of 2008-09, and the sovereign debt crisis that followed. Between 2007 and 2011 the price of gold more than trebled, from $600 an ounce to more than $1,800. But what to make of the recent non-perform-ance of the gold price?
When commodities began to climb out of the slump of early 2016, gold seemed to be the first to recover. Yet the rally in the gold price soon stalled , then went into reverse. Yet in the meantime, Britain voted for Brexit and Donald Trump was elected US president on a promise of protectionist tariffs — a promise which has subsequently been delivered. And all the while the gold price faltered.
If gold was ever a reliable safe haven in a storm it has thoroughly lost its reputation. Neither is it, as is often claimed, a successful hedge against inflation. It is easy to see why, in theory, investors might want to buy gold when the real value of money is being eaten away by inflation, but the facts don’t fit the theory. Certainly, the gold price was strong in the high-inflation 1970s and slumped when inflation fell back in the early 1980s. But thereafter there has been no correlation between the gold price and inflation. Gold hit its nadir in 1999 (when Gordon Brown famously committed to selling half Britain’s gold reserves). But inflation kept on falling as the gold price rose.
The charts of the past 40 years show gold not as a safe haven or hedge against inflation but as an out-and-out speculative investment. Hit it right and you can double, even treble your money very quickly. Get it wrong and you can spend years watching the real value of your gold waste away — with not so much as a bean of income as consolation. Indeed, factor in the cost of hiring a bank safety-deposit box, a guard dog or however else you want to defend your wealth, and your gold trinkets will be earning you negative income.
But just how do you detect when the gold market is about to turn? What was it that made 1980 and 2011 peaks for gold prices and 1999 and 2016 a nadir? It is hard to pick out any indicator which links these years, but one does spring to mind. The clue to the success of gold as an investment is to be found not in poring through financial data but in what movie baddies are choosing to steal.
Take Goldfinger (1964) and The Italian Job (1969). Both were films that revelled in gold as the ultimate symbol of wealth. In both films it was a large pile of gold which represented, for most viewers, unimaginable wealth. And in both cases there followed good years for gold. But now fast-forward to 1979 and The Great Riviera Bank Robbery, also known as Dirty Money — in which a gang of right-wing extremists broke through the sewers into a bank vault.
To steal what? Banknotes from safety deposit boxes. It was a theme followed up in 1981’s Loophole, Albert Finney’s audacious bank raid via a sewer. Had investors taken those films as a ‘sell’ sign for gold they would have done themselves a huge favour.
The gold price peaked in 1980, when it reached $700 per ounce. By 1999 it was down to $250 — a fall even more dramatic once inflation is taken into account. But, in a sign of better times to come, gold started to attract movie-makers again, with Heist in 2001, set around a gold theft from a Swiss aircraft, followed in 2003 by a remake of the Italian Job.
By 2008 and Mad Money, banknote theft was once more à la mode and cash also inspired the aggrieved investors of Tower Heist in 2011, a year which marked the high noon of the gold market. In this case there was a twist in that the victim of the heist had turned his wealth into gold and disguised it as car parts.
Looking to the cinema for investment clues might sound mad, but then again film directors may well be acting on subconscious impulses. If they are choosing to make films revolving around the theft of gold it may be an indication that there is a rising public interest in it — which in turn will help drive prices. There is also the possibility that the films themselves may be influencing public interest in gold.
Goldfinger might as well have been a commercial for the gold industry — watch it and does the thought of marking some occasion with a gold bracelet or putting aside some of your wealth in bullion not seem a little more attractive? So, what are film criminals stealing this year — and is it an indication of what will happen in the gold market? The highest-profile crime film in Britain this year must be King of Thieves — the story of the 2015 Hatton Garden raid which itself bore remarkable similarities to Loophole and Dirty Money. The target was once again safety-deposit boxes containing cash, jewellery and all manner of general valuables.
Nor is there much support for gold in Den of Thieves, set in Los Angeles, which returns to the familiar ground of stealing banknotes — very often in the past a ‘sell’ sign for gold.
So what, then, is the cinema hinting that we should buy? One 2018 film of note is American Animals — the story of four college students who get together to plan a daring heist and the valuables they target are . . . rare books. Perhaps Hollywood’s current hidden message is to stash away a bit of your cash in a few first editions and dusty antiquarian tomes.