Gold isn’t what it used to be. Its certainly not worth what it used to be back in say, 2011! The yellow metal has been steadily losing luster since hitting an all-time high in September of that year.But the bottom came off on international gold prices on Monday.
The metals prices are calculated in US Dollar terms, similar to other commodities. A strengthening USD along with expectations of higher interest rates in the US economy, spells bad news for gold prices. The trend is exacerbated further by weak demand in China and India.
Asian buyers are key market participants. India alone accounts for a fifth of all gold purchases in the world. But even they are not interested in a gold binge at the moment. Media reports there are of jewellers calling prospective buyers to lure them towards gold purchases, only to receive uninterested responses.
So what brought on the latest gold bashing? As the market rate broke below $1,100 per per ounce on Monday, investors dumped holdings by the ton, driving the dive deeper. While investors panic, international observers aren positive either.
“The prospects for gold are not good” stated The Telegraph on Tuesday. According to The Economist, “wags say, if the world economy does indeed collapse completely, lead (in the form of bullets) may be more useful than gold”.
But not everyone is bearish. Jason Goepfert, better known as the SentimenTrader cites a selloff like past Monday “has only occurred 6 times in history”. He contends “all of them were a heads-up that the selling pressure was hitting a temporary exhaustion point.”
In other words, dont expect too many more days of $50 drops in gold price. But even the contrarian stopped short of forecasting a bounce back. The bear hug on gold prices has thinned its rates from a hieght of about $1900 an ounce to almost half. The cold shoulder from China and India may drive it thinner yet.