[miningmx.com] – THE price of gold came under continued pressure
today falling as much as 3.9% to $1,425.75 per ounce in Singapore and extending a
decline that stockbrokers said signalled the onset of a bear market.
It brought renewed pressure on South African gold stocks with Harmony Gold falling
the most in early morning trade. It was down just over 6% while the South African
gold index was already 4.8% lower today after only an hour of trade.
Total gold equity losses on the South African gold index since April 9 were now at
9.6% while a staggering 31% has been lost in the last three months.
AngloGold Ashanti was 4.87% lower while Gold Fields was 4.45% down. Sibanye Gold,
one of South Africa’s other main producers, was unchanged after having shed 4.88%
on Friday.
Gold fell to its lowest level since April 2011 last week registering a 13% drop so far
this year. The decline came after data showed the US recovery was gaining traction –
a development that led some to declare gold was no longer needed as a safe haven.
Prices had tumbled 5% on April 12, taking losses to more than 20% since the record
close in September 2011, and meeting the common definition of a bear market, said
Bloomberg News in a report today.
Holdings in exchange-traded products contracted at a record pace in the first quarter,
and have fallen for the past nine weeks, said Bloomberg News.
The turn in the gold cycle is quickening and investors should sell the metal, Goldman
Sachs Group Inc. said in an April 10 note.
“The demise of gold is still at an early stage,’ Georgette Boele, a commodities
strategist at ABN Amro Group NV, wrote in a note today. “Other assets will become
increasingly more attractive as the growth outlook improves.’
DIFFERENT VIEW
This latest rout is surprisingly severe, with market commentary suggests that it is
largely due to technical selling,” said Investec Securities in a note today.
“Fundamentally we retain a positive view on gold on the basis that the world’s
economic problems are not solved,” it said.
“Central banks outside of the European Union have been buying the metal, and lower
prices would likely trigger stronger physical demand from jewellery markets,
particularly in India and China,” it added.
Said Numis Securities: :Our analysis suggested the market pricing-in $1,400/oz on
average for gold equities, a level which does not seem too far away.
“Stocks have fallen further with the gold price drop and appear to be the lead
indicator, as the market often is.
“Either this is the new price level or the market continues to be oversold. We expect
some form of bounce in H2 but previous highs look like an ambitious climb from
here,” it said.
Roger Bade, an analyst for Whitman Howard in the UK, said it was “remarkable” how
little leverage gold equities had considering the average cost of production was
“creeping up to about $1,400/oz”.
In general, the North American gold equities had “held up” reasonably well, Whitman
Howard said in a morning note.
