USA TODAY International Edition
Gold’s glint fades as it falls to five- year low
A yellow metal is bleeding red ink.
Gold is on an eight- session losing streak and hit a fresh fiveyear low Monday of $ 1093.80 an ounce — its lowest level since February 2010 — before rebounding to close at $ 1,095.50, which was still a 3.2% loss for the day.
“It’s ( been) a rough session for gold bugs,” says Alex Eppstein at Schaeffer’s Investment Research.
Die- hard gold bugs aren’t the only ones feeling the pain. Investors who bought funds that track gold, normally a safe investment in hard times, are suffering tough times of their own. The losses are adding up for popular exchange- traded funds, which trade like stocks. Many ETFs that track the price of gold hit 52- week lows Monday, and have fallen roughly 17% from their 52- week highs from last August and are down 6% to 7% for the year. ETFs that track the performance of goldmining stocks are getting creamed even worse.
Even so, the gold slump is not necessarily a bad thing. The improving U. S. economy is a big reason gold prices are off so sharply. Stronger growth in the U. S. not only takes away some of the luster of gold’s reputation as a defensive play in tough times but points toward the Federal Reserve hiking interest rates later this year, which also hurts the story for gold as higher rates dents inflation. Gold, a hard asset, is viewed as a hedge, or pro- tection, from runaway inflation.
Data out of China last week that showed Beijing has been buying less gold than analysts forecast hurt the metal’s price. Technical factors related to trading strategies have contributed to the slide. The continued strength of the U. S. dollar also makes gold less valuable, analysts say.
The latest leg down in gold extends a bear market that began in August 2011, according to Bespoke Investment Group.
The bear market in gold is now 1,428 calendar days long ( the second- longest on record) and has seen gold tumble nearly 42% ( the fourth- worst) from its Aug. 22, 2011, peak of $ 1888.70 per ounce, according to Bespoke. The previous gold rally, however, lasted more than 11 years and saw gold rally by 646%.