Is gold’s extraordinary rally finally about to end as it limps towards the close of its twelfth year of gains? Even a fright over the US Budget has failed to revive much interest in a commodity, often treated as a safe investment in troubled times, that has seen its average annual prices climb every year starting in 2001.
Most banks still cling to forecasts for gold to hit record highs in 2013, but the factors they cite — ultra-low interest rates, fears of inflation — have so far failed to propel prices out of the past year's sideways trading channel.
A brief upwards price spike in November, in response to the latest monetary stimulus programme by the US central bank, was quickly met by selling.
As trading thins into year-end, the metal is down nearly 5% from four weeks ago in a further erosion of what looks like its smallest annual gain since 2008, of some 7%.
At around $1,666 an ounce on Wednesday, it remains 13% below last year’s record high of $1,920.30 and well away from the $2,000 level that beckoned to gold bulls at the time.
“The bears have basically said to the gold market, ‘we don't believe you’, and hit the price hard,” bullion broker Sharps Pixley’s chief executive Ross Norman said.
“The test of a market is how it behaves under adversity, and gold did not perform well.” This year's average gold price, while still a record high at $1,668 an ounce, has fallen well short of analysts forecasts at the start of the year for an average of $1,765.
Charts show prices have held within a broad sideways trend channel since dropping from 2011’s record.
An informal survey conducted by Reuters last week showed ten out of 12 analysts still expect gold prices to set new highs both in intraday and average terms next year.
But gold bulls counting on low interest rates, heightened sovereign debt fears in the euro zone and the threat of inflation risk encountering the law of diminishing returns.
A fresh round of monetary stimulus from the US Federal Reserve last week, in the form of a pledge to buy $45 billion a month in longer-term Treasuries, failed to produce more than a few hours' worth of gains in gold.
Last time the Fed announced action on a similar scale, on September 13, it sparked a rally in gold to its highs for the year.
The troubles in the euro zone have