Gold Market Reels From Huge Price Hit In Second Quarter Spurring Mixed Activity In Market And Pricing
July 10, 2013 1:16 AM EST
The gold market took such a huge hit in June that various players in the industry are just beginning to feel the real repercussions, and some analysts are forecasting more of the same, especially for gold miners.
The investments in gold and gold miners by hedge fund manager John Paulson have suffered double-digit losses for three consecutive months. The billionaire's gold portfolio declined dramatically after June's tumble, a drop that followed the Federal Reserve's announcement that it would curb its economic stimulus program, perhaps beginning this year. And while gold dropped by only 12 percent in June, Paulson & Co's gold portfolio fell by 23 percent, contributing to a total of 65 percent in losses from January through June of this year.
The Fed's news has also caused holdings in gold-backed exchange-traded products to fall below 2,000 metric tons for the first time since May 2010, activity that sell-side analysts can't ignore.
Citigroup Inc (NYSE:C) has warned that none of its gold companies will generate free cash flow at current gold prices because three crucial factors have resulted in fast margin contraction -- rising unit costs (15 percent year over year), sustained high capital budgets plus the falling gold price.
However, HSBC Holdings PLC (ADR) (NYSE:HBC) says that any increase in emerging market demand could give a slight lift to gold prices. The bank's analysts say gold recovered some value after the U.S. dollar's recent rally slowed and as investors did some "bargain hunting" in the wake of June's price drop.
As wage negotiations approach, work stoppages in South Africa's mines could lead to higher gold prices. Observers say although gold short positions broke the record all-time high for a third week, gold net long speculative positions run the risk of turning negative.
Then there is evidence of mixed activity among platinum group metals, according to data from the government's Commitments of Traders report. The group's figures show that silver prices increased yet platinum and palladium decreased.
To contact the editor, e-mail:
Most Popular Slideshows
Join the Conversation
- Russia's New Tactical Nuclear Weapons Program Growing Confident Against the US: Talks of World War III
- Apple and Google Engage in Thermonuclear War, New Google Translate Chat App in the Works
- Kobani ISIS Fighter Sends Out Desperate Message For Prayers And Support: Euphoria Turns Into Desperation As Kurds Advance
- Chris Algieri’s Battered Face Trends On Social Media
- Walmart Offers the Best 2014 Black Friday Deals on iPhone 6, iPad Ai2 & Other Gadgets – Reports
- Highest Paid NBA Players 2014: NBA Stars Who Earn More Than LeBron James
- Home Depot Early Black Friday 2014 Sale Up To Nov. 29, 2014 Includes Special Buys On Appliances Such As Samsung Refrigerators, Whirlpool Electric Ranges And Hoover Vacuum Cleaners