I remember the otherwise lovely 2011 which positioned me well, and then ... out of the blue, kaboom, the FFs went to wet-work
lbma.org.uk
After the Gold Crash | AlchemistSpring 2014 marks several anniversaries for the bullion market – 60 years since the resumption after World War II of London’s daily fixings for instance, or three years since silver touched $50 per ounce for the second time ever, and ever so briefly again. Gordon Brown’s ham-fisted announcement of UK gold sales in May 1999 still captivates public memory in the UK. But perhaps our market’s biggest anniversary this spring should also be a first. Because it marks one year since the historic crash in gold and other precious metals prices starting in mid-April 2013. Goldman Sachs had advised clients to short gold early that week. Cyprus was told to sell gold on Thursday by the EU and IMF. Gold prices fell into London trade on Friday 12 April, dropping as the market closed for the weekend through $1,530 per ounce – the previous 18 months’ low – only to slump another 3.5% by the time New York trade ended. Then on Monday the real trouble showed up. Fellow members need no reminding (and most will want it still less). But the way last year’s crash unfolded, and how it altered demand worldwide, deserves study. Because whether those changes now prove permanent looks critical to our market. The crash also highlighted unique features, most plainly in gold, which may prove more lasting. Across last year as a whole, gold prices fell some 30% – the same amount US equities returned to investors in total. Yet gold squeezed almost all of 2013’s drop into the second quarter alone, down 25.4% in dollar terms, and half of that was achieved in just those two days in April. A second slump to $1,180 per ounce then marked gold’s low of the year, hit on the last trading day of June and again on New Year’s Eve. Prices have essentially been flat for 12 months now, closing between $1,200 and $1,400 on a monthly basis. Viewed as a market reset, therefore, gold’s drop was swift and successful. Because while the slump was in fact finished by midsummer, the wrenching loss in Q2 forced Western sellers, whenever they then sold, to accept the discount prices needed to unleash bargain buying from Asia in particular. The surge in consumer demand for gold jewellery, bars and coins very nearly matched the outflows from exchange-traded trusts and other investment vehicles. But this extra demand wasn’t for the securitised form those investments took. Nor was it local to where their underlying bullion was held.
forbes.com
The Year Of The Gold Crash
Nathan Vardi
Oct 11, 2013,
Following the money trail
Updated Oct 11, 2013, 02:50pm EDT
This article is more than 10 years old.
For 12 straight years, the price of gold has increased in value in the face of the popping of the Internet bubble, Enron accounting scandals, the Iraq war, the boom and bust of housing, the financial crisis, and the era of massive monetary stimulus. The yellow metal soared as high as $1,900 an ounce as individual investors, hedge funds and big financial institutions piled into a perceived safe haven for the new millennium.
But gold is headed for its first annual loss in 13 years in one of the big financial stories of 2013. Gold had another down day on Friday, dropping by more than 2% after a big sale in the futures market caused the CME Group ’s Comex to halt trading in December gold futures for a few seconds. Going into the middle of October, gold has fallen by more than 24% in 2013 to a recent $1,266 an ounce and at the moment is heading toward a bear-market year.
The latest blow to gold has come from Washington, where President Barack Obama and House Republicans appear to be on the verge of an agreement that will avert the prospect of an imminent U.S. debt default. The sentiment around gold has been diminishing since April, when billionaire investor George Soros indicated that gold was no longer a safe haven and the smart money was getting out. The shadow over gold has continued through this month, when Goldman Sachs' head of commodities research said gold was a “slam dunk” sell and headed for $1,050 an ounce.
The drop in the price of gold has smashed the economics of overstretched gold mining companies that have seen their stocks pummeled this year. The Market Vectors Gold Mining ETF has tumbled by 50%. The crisis in the gold mining sector is huge given that these companies have underperformed the price of gold itself for years, giving investors little upside when the price of gold rises and sticking them with big losses when gold falls like it has this year.
Not only have big gold mining companies like Barrick Gold seen their shares fall by 50%, they are also under siege from shareholders who are angry over lavish executive pay and are demanding board room and strategic changes. Small so-called junior gold miners, like NovaGold, are doing even worse in the stock market. The company that has unsuccessfully been trying to develop a gold mine in Alaska since the start of the gold boom has suffered a 54% drop in its shares this year. Gabriel Resources, a small gold company operating in Romania, backed by billionaire hedge fund managers like John Paulson and Seth Klarman, has seen its stock trade down by 67% in 2013 to 79 cents a share.
It has been a tough year for those who championed the gold boom. |
