Posts Tagged slump
Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market.
George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year. while speculators in new York futures are the least bullish in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 39 percent to $2,140 an ounce in 2012.
The divergence of views is widening after prices declined 19 percent from a record close of $1,900.23 on Sept. 5, or one percentage point away from a bear market. as some investors retreated to cash amid a $10 trillion slump in global equity values since may, others bought more metal, taking holdings in exchange-traded products to an all-time high two weeks ago. Bullion’s 8.1 percent gain in 2011 means it’s on track to beat stocks, bonds and the dollar for a second straight year.
“It’s done its job this year of protecting investors,” said Michael Cuggino, who helps manage about $15 billion of assets, including $3 billion in gold, at Permanent Portfolio Funds in San Francisco and correctly predicted in February that prices would keep rising. “Gold has been all over the place. If you bought gold at $1,800, then you aren’t too happy. Some people will get out of gold, but the longer-term investors will remain.”
Investment in physical metal is cooling. The U.S. Mint’s sales of American Eagle gold coins in November were the weakest since June 2008, according to data on its website.
Demand had strengthened most of this year as Europe’s debt crisis widened and the Federal Reserve pledged to keep interest rates near zero until at least mid-2013. The European Central Bank cut rates to 1 percent on Dec. 8, matching the record low of the euro era that began in 1999. that increases the appeal of bullion because it generally earns investors returns only through price gains.
“The longer-term trends, mainly government fiscal and monetary policies, haven’t changed,” said Tom Winmill, who helps manage more than $200 million of assets for Midas Funds and whose Midas Perpetual Portfolio may increase its 19 percent investment in bullion and gold mining companies in the next quarter. “Gold has that preservation-of-wealth role and was probably used quite a bit in the last several weeks.”
Options traders are also bullish, with the top nine holdings all betting on higher prices. The two most widely held contracts give holders the right to buy gold at $2,000 by the end of March and may, data from the Comex exchange show.
This article appeared on page C – 4 of the San Francisco Chronicle
December 28, 2011, 8:26 PM EST
by Debarati Roy and Maria Kolesnikova
Dec. 28 (Bloomberg) — Gold fell, capping the longest slump since October 2009, and silver tumbled to a three-month low as Europe’s deepening debt crisis drove commodities and stocks lower.
The euro dropped to an 11-month low against the dollar as lending to financial institutions sent the European Central Bank’s balance sheet to a record high. The Standard & Poor’s GSCI index of 24 raw materials and the MSCI World Index of equities were poised for the biggest declines in two weeks. Platinum approached the lowest since November 2009, and palladium dropped almost 3 percent.
The ECB said lending to euro-area banks jumped 214 billion euros ($276.9 billion) to 879 billion in the week ended Dec. 23, bolstering credit to the economy during the fiscal turmoil. Gold has slumped 19 percent from a record $1,923.70 an ounce on Sept. 6, partly on sales to cover losses in other markets. About $10 trillion has been erased from global equities since may.
“What’s going on in Europe is very worrying,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in an e-mail. “The dollar’s strength is working against all commodities, including gold.”
Gold futures for February delivery declined 2 percent to settle at $1,564.10 at 1:47 p.m. on the Comex in new York. The price dropped for the fifth straight session, the longest slide since October 2009. The commodity headed for the first quarterly slump since September 2008.
Silver futures for March delivery fell 5.2 percent to $27.234 an ounce on the Comex. Earlier, the price touched $27.10, the lowest since Sept. 26. The metal has plummeted 45 percent from a 31-year high of $49.845 on April 25.
Gold imports by India, the biggest consumer, may drop as much as 50 percent this month after the rupee plunged, according to the Bombay Bullion Association. China restricted gold trading in spot and futures contracts to the Shanghai Gold Exchange and the Shanghai Futures Exchange to crack down on illegal buying and selling of commodities.
“Concerns were raised over the sustainability of demand out of China and India,” Marc Ground, an analyst at Standard Bank Plc, said in a report.
Platinum futures for April delivery declined 3.2 percent to $1,392.40 an ounce on the new York Mercantile Exchange. Earlier, the price touched $1,388.60. on Dec. 15, the metal declined to $1,376, the lowest since Nov. 13, 2009.
Palladium futures for March delivery slumped 2.9 percent to $647.15 an ounce on Nymex, the biggest drop since Dec. 14.
this year, gold has advanced 10 percent, heading for the 11th straight annual gain, on demand for an alternative investment amid slumping equities.
“Gold has been one of the best performers this year, so it comes as no surprise that we are seeing some end-of-year profit- taking,” said Ronald Stoeferle, a commodity analyst at Erste Group Bank AG in Vienna.
Before today, the MSCI equity index dropped 7.5 percent this year.
–Editors: Patrick McKiernan, Steve Stroth
To contact the reporters on this story: Debarati Roy in new York at email@example.com; Maria Kolesnikova in London at firstname.lastname@example.org
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FORTUNE – for the 11th year in a row, gold prices have rallied, making this one of the longest winning streaks for the yellow metal. and for most of 2011, it seemed like nothing could stop prices from climbing — gold prices peaked in September at more than $1,900 an ounce.
But in recent months, many high-profile investors have sold their positions, suggesting that gold’s glory days could be coming to an end.
Billionaire investor George Soros, who called gold “the ultimate bubble,” cut his holdings in the SPDR Gold Trust (GLD) as early as may. Hedge fund manager and long-time gold bull John Paulson held tight for a few months, but eventually slashed his gold holdings by a third during the third quarter.
And last week, economist Dennis Gartman, who correctly predicted the slump in commodities in 2008, sold off the last of his bullion. He stresses that he isn’t bearish on gold, but thinks the precious metal isn’t exactly the safe haven that many investors have come to know it.
Admittedly, few are screaming bear in the gold market. but even the most bullish investors admit sentiments have changed in a noticeable way.
The last time gold went bust was in 1980, when prices dropped more than 60% in a single year. It wasn’t until 20 years later, in 2000, that investors saw positive returns. Is gold returning to a bear market?
Since its September peak, gold has since lost about 15% of its value. Technically, it takes a 20% decline for a bear market to transpire. It’s anyone’s guess where price may fall in the murky world of commodities investing, but the precious metal doesn’t have far to go before it formally enters bearish territory.
Here are four signs that suggest gold may be losing its glitter:
U.S. Treasuries get more love than gold
The world could nearly collapse, but the value of gold will remain. that popular notion has long fueled the rise of the yellow metal. unlike other commodities, gold is known for its intrinsic value since there are few practical uses for it. and yet, it has been viewed as a safe haven from slumping stock markets and slow growth.
But at a time when European officials struggle with debt woes and slip closer to a recession, investors have actually been scurrying away from gold. Daily price swings have sent investors looking for an even safer bet, and they’ve found it in U.S. Treasuries. Ironically enough, this comes only four months after Standard & Poor’s stripped the U.S. of its stellar triple-A rating.
Bond yields, which move opposite of prices, have fallen to historic lows. Ten-year Treasuries have dropped to 1.87% — proving that investors’ appetite for such securities haven’t waned much, even as S&P warns that the U.S. is no longer the safest of borrowers.
Investors aren’t too worried about inflation
The flock to bonds also signals that investors aren’t very worried about inflation, says Cetin Ciner, finance professor at the University of North Carolina in Wilmington. this partly explains the fall in gold, which is often used as a hedge against steadily rising prices.
“It’s very hard to predict where prices could go, but ultimately the fundamentals are not there,” says Ciner, who has done extensive research on the gold market. “It’s not the safe investment that people thought it was. It has actually become very dangerous right now.”
Prices have fallen below gold’s 200-day moving average
When gold falls below the 200-day moving average, investors typically take notice. Last week, for the first time in two years, the precious metal fell below the average of $1,615 an ounce and is currently trading at $1,613 an ounce. Though this hasn’t led analysts to call a bear market, Boston University finance lecturer Mark Williams says investors should take the development as a “wake-up call.”
“The next resistance level is $1,500,” says Williams, a former trading floor executive. “If gold drops below this floor, it is further proof that the bubble, which peaked in September at more than $1,900, has begun to burst.”
Gold beats platinum
And then there’s platinum, a precious metal that also has industrial uses. Historically, platinum trades at a premium of $100 or more over gold. but that shifted in August when gold neared its most recent peak. Williams points out that this is another indicator that gold prices are inflated. at current platinum prices of $1,400 an ounce, gold could fall to $1,300 or lower, he says.