Given the current popularity of conspiracy theories in South Africa, trade unions now negotiating for pay hikes probably believe employers have been manipulating the gold price. If only. Eight straight losing sessions have taken the price to five year lows. It’s bad news for the industry, including a labour force whose negotiators refuse to link their members’ productivity with wage demands. Gold has been out of favour for some time, but the latest knock comes from slowing purchases from China and concerns at the impact of higher US interest rates later this year. During its bull run, gold was helped by concerns that a flood of money created by Quantitative Easing would lead to inflation and massive currency devaluation. It didn’t. And from what we’re seeing now, is unlikely to. Then again, gold has always been best bought when it has appeared weakest. That historical fact will ensure the most hardened of the gold bugs remain interested. – Alec Hogg Ā
By Eddie van der Walt, Hannah Murphy and Debarati Roy
(Bloomberg) — Why buy gold? Thatās a question thatās confounding some traders.
The eight-day rout thatās sent gold to a five-year low has some forecasters expecting more losses. Oversea-Chinese Banking Corp.ās Barnabas Gan, the most accurate forecaster of precious metals in rankings compiled by Bloomberg, predicts gold will reach $1,050 an ounce by December, a 5.2 percent drop from current levels.
āI have to think really hard at the moment to come up with good reasons why anyone would want to invest in gold,ā Gerhard Schubert, founder of Schubert Commodities Consultancy DMCC, said from Dubai on Monday.
Investors are bailing on gold as the list of reasons to be bearish grows longer. China didnāt buy as much bullion as analysts expected, the Federal Reserve may raise interest rates this year and investors see less need for a safe haven as Greece works to stay in the euro. About $2.7 billion was erased from the value of exchange-traded products tracking precious metals last week, the most since March.
Gold futures for August delivery lost 0.4 percent to $1,102.80 an ounce as of 10:36 a.m. in Singapore on Tuesday after closing at $1,106.80 on July 20, the lowest since 2010. Prices dropped 6.9 percent this year.
Money managers are holding the smallest net-bullish bet on gold since the U.S. government data begins in 2006. The net-long position tumbled 39 percent to 4,633 futures and options in the week ended July 14, U.S. Commodity Futures Trading Commission data released Friday show.
āDangerous Watersā
The decline led some forecasters to consider cutting year- end estimates. ABN Amro Bank NVās Georgette Boele and Robin Bhar of Societe Generale AG say bullion will approach $1,000 by December, almost 10 percent below todayās price.
āGold is navigating very dangerous waters,ā Bart Melek, the head of commodity strategy at TD Securities in Toronto, said by phone. āWe cannot ignore the recent price action and we will relook at our forecasts.ā
Mining stocks are also getting hit. AngloGold Ashanti Ltd. sank to a record low in Johannesburg, while Canadaās Barrick Gold Corp., the worldās largest producer of the metal, dropped to the lowest since 1990.
Some analysts are holding onto bullish views. Thorsten Proettel, a commodities analyst at Landesbank Baden- Wuerttemberg, said gold will eventually rise because Europeās political problems are far from over. Still, his forecast for gold to end the year a $1,300 is unrealistic, he said by phone from Stuttgart, Germany.
The most likely path for gold is lower, according to Bhar of Societe Generale.
āIf anyone can show me the bullish case for gold, Iād like to see it,ā Bhar said by phone. āI doubt this is the final nail in goldās coffin. I think we can add a few more.ā
