Gold Drops Below $1,200 and Aims for Worst Quarterly Slump on Record

Friday, 28 June 2013
Written by  Bloomberg
Published in Gold Investing
Gold dropped to a near three-year low heading into the weekend and is also poised for the worst quarterly slump on record. While gold has struggled mightily in 2013 (not at all what most thought), the fact of the matter is that this most recent slump can be attributed to the Fed announcement that they were curving the stimulus program.

Positive-Pullback

Gold futures slid 25 percent this quarter, heading for the biggest loss since at least 1975, with London prices set for the largest fall since at least 1920. Fed Chairman Ben S. Bernanke said June 19 that the Fed may slow its bond-buying program this year. U.S. data may show today that consumer sentiment improved and business activity expanded, economists said.

Bullion slipped 28 percent this year, set for the biggest annual drop since 1981, after rallying the past 12 years. About $62.5 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. 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.

“ETF holders are still selling and no one wants to be in gold,” Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said today by phone. “We did see physical buying come in a bit and if that continues it will provide some support.”

Gold for August delivery fell another 0.8 percent to come in at $1,201.40 an ounce earlier today on the Comex in New York, after reaching $1,179.40, the lowest since Aug. 2, 2010. Futures trading volume was 64 percent above average in the past 100 days for this time of day, according to data compiled by Bloomberg. Gold for immediate delivery in London added 0.1 percent to $1,202.42.

So what does the future for gold look like? Has the precious metal lost its luster for many? While it may seem like this, the real reason gold is dropping is due to a number of outside factors including the Fed stimulus structure, the fiscal cliff, interest rates and inflation. All of this is working together along with the stronger dollar to really drive gold down.

We will see how July plays out, but right now gold is something you may want to hold on to if you have it and wait for the price to go back up.

Original Article: Bloomberg

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