While this is not a prediction that the price of gold will fall, McElvaine simply believes bullion isn't the type of investment he is looking for. "You're more of a psychoanalyst than an investor if you're buying gold," he says. "When an investment is advertised on television, I have hard time thinking it will fit in to what I do.
"On a fundamental basis, the manager notes that three years ago, net producer output of gold (less hedging, plus scrap) came to about 3,000 tonnes per year. Meanwhile, fabrication demand -- industrial, dental and jewellery -- came to roughly the same amount. So fundamental supply was roughly in line with fundamental demand.
Fast forward to today and McElvaine expects we'll have about 4,000 tonnes of production and scrap. However, lower fabrication demand will only absorb about 2,000 tonnes.
"My issue with that is I don't like situations that are so dependent on emotion. Could that demand double? Of course. Could it halve? Just as easily."
Tim McElvaine, of McElvaine Investments, in November5th financial Post