More gloomy news for gold bugs with another bout of selling overnight which drove gold prices down by more than 2%, forcing it under $US1,200 an ounce in US futures trading for the first time in 34 months.
The metal lost another $US29 an ounce in regular and after hours trading in New York to end at $US1,200 an ounce.
That took the loss over the past two days to around $US80 an ounce.
The big loss occurred in late trading early today when the price dropped to as low as $US1,196.10. According to US analysts, gold hadn’t traded below $US1,200 an ounce since August 2010.
In Asian trading Friday morning the sell-off continued with the metal falling to $US1184.94 an ounce, its lowest since August 2010. There is growing market commentary about how no one ‘wants’ to hold gold now. That’s understandable given the violent slide in the price since mid-April.
Driving the price lower was more good news about the heat of the US economy with solid consumer spending and a fall in jobless numbers.
The likes of UBS, HSBC, Credit Suisse and Goldman Sachs are not the only gold bulls to have recast their forecasts in the face of the slide in world prices for the metal – Reuters GFMS, one of the more established bulls for the metal, has been forced by the slide in prices to slash its forecast – only three months after telling the world that prices should rally back over $US1,800 an ounce by the end of the year.
Reuters GFMS used the occasion of the release of an Italian language version of its annual gold survey overnight to issue a re-worked forecast for the metal.
For those still believing in gold and gold mining stocks, it makes depressing reading.
"The extreme price action and changes to institutional investors’ activity since mid-April has led to downward revisions of price forecasts across the industry, including at Thomson Reuters GFM," the firm said in a press release issued overnight.
“Although many of the core positive arguments for a strong gold price remain in place, the list of negative factors for gold has grown in recent months, not least growing investor disillusionment, and this sets the scene for what could develop into a multi-year bear market for gold, an occurrence that earlier this year we had only forecast to emerge in 2014.”
“That said, from what now represents a heavily oversold position in late June we stand neutral to cautiously positive on the price in the second half of the year, with risks to the upside based around a possible re-ignition of the dormant Eurozone sovereign debt crisis, renewed uncertainty in the United States over the debt ceiling debate, a slow-down in the equity market and indeed a delay of the tapering to the Fed’s quantitative easing measures.”
As a result of this rethink, GFMS expects the 2013 average to remain above $US1,400/oz and for gold to trade around a range of $US1,100-1,400/oz next year.
Reuters GFMS said that "the pull-back in price would likely start to bring about decreasing supply of gold, principally through a moderation of scrap flows, coupled with improvements in fabrication demand, especially in a number of price sensitive jewellery markets.
“The changing dynamics of supply and demand under a lower pricing environment for gold will in turn place a less of an onus on the investment sector, the call upon which has grown substantially in recent years in order to absorb the large market surpluses that have prevailed.”
Back in April, the firm forecast an average gold price for 2013 of $1,730 an ounce, with the range in prices between $US1,530 and $US1,850. At the time of the forecast the price was around $US1,550. It forecast the price would push back over $US1,800 an ounce late in 2013. The firm cited fears about inflationary fears from the Federal Reserve’s quantitative easing.
Data out overnight showed that core US inflation was 0.1% in May and an annual rate of 1.1% – half the Fed’s 2.0% market. It’s disinflationary fears (and perhaps deflation) that are now worrying more and more of gold’s harder headed investors. Inflation has been forgotten for the time being. Some forecasters are now wondering how long before gold falls Under $US1,000 an ounce.
