Gold’s quick fall in price perplexes state analysts
| SOME INVESTORS LOSE FAITH IN PRECIOUS METALS
INVESTMENTS
Gold prices continued their slide Wednesday to a 34-month low, with the largest quarterly drop since at least 1920.
Area analysts are perplexed by the steep, quick price falls. They pointed to the Federal Reserve announcement last week that it may reduce its stimulus efforts for the most recent declines, but the reason for the falling prices over the past two years and especially since January is difficult to explain.
“All of the fundamentals are there that gold and silver should be going up,” said Mike Anderson at Tulsa Gold & Silver.
“The fundamentals are still there. It’s just shaky,” he said.
Gold has dropped 23 percent this quarter, heading for its biggest loss since at least 1920 in London, according to Bloomberg.
Gold for immediate delivery fell as much as 4.4 percent to $1,222 an ounce, the lowest since Aug. 24, 2010, and was at $1,224 at 7:48 p.m. in London.
New York Mercantile Exchange futures prices dropped $45.20 to settle at $1,229.60.
Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011.
Fall follows announcement
Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, said that after the announcement from Fed Chairman Ben Bernanke last week that the Fed may slow its latest quantitative easing program, which some have seen as a boost to the economy, the whole market took a sharp downturn.
Under the QE program, the Feds are buying up Treasury bonds to buoy the financial markets.
“Over the weekend, people got calmer and stocks rose this week,” Dollarhide said. “But what continues to fall are bonds and gold.”
Gold has historically been seen as a commodity market that is generally safe because it is something physical and tangible. Gold prices soared during the most recent economic recession.
“Gold did exactly what it was supposed to do,” Dollarhide said. “Gold shot up; it went through the roof.”
Dollarhide said that gold can serve as a hedge against high interest rates and inflation.
Interest rates have been historically low, but the Fed’s announcement could see rates rise. Despite that concern, gold prices have continued to fall.
“Gold has been an oddity,” Dollarhide said.
About $60 billion was wiped from the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value and speculation grew that the Fed will taper debt-buying that helped gold cap a 12-year bull run last year.
A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver, platinum and palladium, which are used more in industry than gold.
Silver futures drop
Silver futures for September delivery tumbled 4.8 percent to $18.613 an ounce in New York after touching $18.385, the lowest since Aug. 25, 2010.
Trading was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
On the New York Mercantile Exchange, platinum futures for October delivery fell 3.4 percent to $1,307.40 an ounce, after earlier dropping to $1,305.60, the lowest for a most-active contract since October 2009.
Trading was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Palladium futures for September delivery retreated 5.3 percent to $633.25 an ounce, the biggest slump since April 15.