Gold loses shine as prices fall

(4 votes)

You might have heard in the news recently that the price of gold is falling.

Commentators say investors are selling their gold here there and everywhere, out of fear that gold will be worth little more than the well-worn shirt on a miner’s back.

That’s a slight exaggeration, but there’s no denying that the price of gold is falling. And it’s expected to continue falling for years to come.

Late last week, gold dropped briefly below US$1,550. It might still sound like a high price, but it hasn’t been that low in about a year.

Why the slump, you might ask.

Well, the top dogs in all things gold are saying that the metal has had its day. They expect that, due to an acceleration in US economic growth and gold’s recent lacklustre price performance, prices will continue to fall. So, for those playing at home, it won’t be worth as much.

And it seems that people are taking the forecasts of the top dogs very seriously – they’re ‘panic selling’.

According to The Age, the March quarter saw global gold exchange-traded funds (ETFs) record their largest outflows since the products were launched a decade ago.
Independent share markets website The Daily Reckoning suggests that this panic selling could send gold as low as US$1,400 in a matter of weeks.

After a 13-year run, investors are selling: “Selling is contagious. And right now, it's getting close to a pandemic”, The Daily Reckoning reports.

So, who are these top dogs and what are they saying?

According Reuters newswire, Goldman Sacs on Wednesday lowered its 2013 average gold price forecast to $1,545 an ounce from $1,610 and its 2014 price view to $1,350 an ounce from $1,490.

The bank had already cut its gold forecasts in late February, reducing its 2013 price view from $1,810 an ounce.

They believe that a sharp rebound in prices is “highly unlikely”.

“Despite resurgence in euro-area risk aversion and disappointing US economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning,” Goldman said.

“With our economists expecting few ramifications from Cyprus and that the recent U.S. slowdown will not derail the faster recovery they forecast in (the second half of 2013), we believe a sharp rebound in gold prices is unlikely.”

On a longer-term front, Goldman said its price forecast for 2017 and beyond remains at $1,200. “While higher inflation may be the catalyst for the next bond cycle, this is likely several years away,” the bank warned.

UBS is another heavyweight with grey predictions.

On Tuesday, the bank lowered its gold price forecasts for 2013, saying that the precious metal has already faced many challenges this year.

"Market concerns on the longevity of the Federal Reserve's quantitative easing, a rotation into equities, benign inflation and the focus on better economic growth are valid threats to gold's upside potential," UBS analysts said in a note.

UBS reduced its 2013 price forecast for gold to $1,740 per ounce from $1,900, while maintaining its forecast of $1,700 per ounce for 2014.

Gold shines Down Under

It’s not all doom and gloom on the gold front, however, with Evolution Mining officially opening their Mount Carlton gold, silver and copper mine in Queensland, creating more than 100 new fulltime jobs.

Evolution has invested over $200 million since 2006 on exploration, evaluation and development of the mine.

“I’m delighted by the jobs created, the skills to be learned, and by the boost to local businesses and the Queensland economy.” Queensland Premier Campbell Newman said when he opened the mine on Wednesday.

“Mt Carlton is expected to create around 135 fulltime jobs when the mine is in full production and further boost the competitiveness of Queensland’s resources sector.”


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Minetalk Poll

Is the mining boom in Australia over?

Is the mining boom in Australia over?

No, it's just media hype.
Still plenty of resources.
There will be a second boom.
Yes as a result of lower demand.
1 Votes left

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