Tags: gold | China | India | buyer

FT: Gold Is Taking a Walk Down Lonely Street

By    |   Thursday, 06 November 2014 12:37 PM EST

Gold appears to have lost all of its best friends — no one is stepping forward to rescue the sinking precious metal as the bears take charge.

When gold collapsed last year, Chinese buyers stepped up and the country eclipsed India as the world's largest gold consumer, the Financial Times noted.

In 2014, however, no one appears to be taking up the slack, as retail consumption in China has declined by an estimated 20 percent.

"There is a natural caution on the part of buyers and they don't want to catch the proverbial falling knife," said Philip Klapwijk, managing director of Precious Metals Insights.

"Chinese consumers are a little bit wary – last year they piled in with the correction of the price. There isn't the same conviction that it's a temporary blip down [this year]."

It probably has not helped that the dollar is stronger, eliminating one reason to hedge against currency fluctuations or commodity inflation by buying gold.

"The bears seem to be well and truly in charge. Near term, it is hard to argue otherwise," ANZ analyst Victor Thianpiriya told the Times.

Gold was recently trading around $1,143 per ounce, its lowest mark since April 2010.

The Times added that a Chinese government investigation into precious metals exports is also not supportive to gold prices. The World Gold Council recently found that gold speculation in China was part of the shadow banking practices that have dogged that nation.

Klapwijk told the newspaper that if China and India began to absorb more gold, it would curb the fall in the yellow metal's price.

In the meantime, falling prices continue to punish miners and producers.

"The gold price fall is also bringing closer a moment of reckoning for gold miners. A further fall to, or past, $1,000 per ounce would force many to take more decisive action, including mine closures, or to seek salvation in mergers," the Times stated.

According to The Sydney Morning Herald, further pressure could be in store for gold because it keeps getting more expensive relative to silver, a closely watched indicator. The ratio is now at its highest level in five years.

"Gold is overvalued to silver," Yoni Jacobs, chief investment strategist at Chart Prophet Capital, told The Herald. "It looks like gold could fall more. People are realizing it is not a good investment when the equity markets go up and as the dollar is getting stronger."

Gold price are threatening to post their first back-to-back annual losses since 1998 as some investors have lost faith in the metal as a store of value.

"The story of gold falling is the strength in the dollar and the strength in the equity market, and that's the trade." Jeffrey Sica, chief investment officer of Sica Wealth Management in Morristown, New Jersey, told the Herald. "Short term, it's going to get ugly."

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Gold appears to have lost all of its best friends — no one is stepping forward to rescue the sinking precious metal as the bears take charge.
gold, China, India, buyer
Thursday, 06 November 2014 12:37 PM
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