Gold losses weaken its status as a refuge in times of stress

Gold price technical analysis 30 - May, 2013

Over the past four years phones were hardly stopped ringing with agents and gold, such as Manfra and Tordela and Brooks, in downtown Manhattan.

Investors have rushed to buy gold when Lehman Brothers declared bankruptcy in 2008. When the crisis erupted in the euro area in 2010, investors bought more gold. When the United States lost its debt rating at ‘A three-in last summer, bought quantities of more and more.

But this year dropped the buying spree, said Mike Kramer, President of the agents of gold in Manhattan: “We passed the days where we wonder whether the phone is working or not.” The estimated decline in sales of gold and silver coins and small bars by about 50 per cent in the past two months.

It is not the only one who complains about this. In the United States in particular, and in Europe in general, diminished interest in gold and silver.

And the spread of apathy towards the precious metals had a negative impact on prices. Last week gold fell to its lowest level in four months, arrived in 1527 dollars per ounce, down 25 percent from its peak in September last, when he went up to 1920 dollars.

And shows clearly the transition at the level of demand for gold coin – which is often seen as a key indicator of moral. Decreased sales of “American Eagle” gold coins, one of the popular, 63 per cent a year since February last, according to the currency minted in the United States. Sales of “Vienna Wilharmonieks”, the most popular in Europe, 19 per cent for gold and 31 per cent of silver in the first quarter, according to the currency minted in Austria.

Even with retail investors – a description that analysts expressed by ordinary people – who are showing a loss of interest in gold, are questioning the optimistic outlook among traders.

He asked Goldman Sachs in a recent report: “Is the gold loses its luster as a currency of last resort?”. And reduce each of the “HSBC”, and “Barclays”, and “UPS”, and “Macquarie” forecast prices for the precious metal.

Decline in demand due in part to the better economic data is expected to come from the United States, which diminished the hopes of further quantitative easing, or the emergency purchase by the Fed for U.S. Treasuries.

But investors were also disappointed by the performance of gold, not only because of the decline in prices, but after most of the expectations declined because of concerns about growth and the crisis in the euro area, in addition to the confusion that has occurred between the investors who bought gold as a refuge from financial turmoil.

Also cut off the traditional relationship between gold and interest rates adjusted for inflation – fell as interest rates fell with it the opportunity cost of owning gold.

Says Jonathan Potts, Managing Director of Fidela you want, the largest agent for the manufacture of alloys in the United States: “Currently I do not hear the intensity in the voices of the people who are driven by fear to buy precious metals,” noting that sales during the past two months was the quietest since 2007.

In the end, was the mainstay of traditional material in the Asian markets are absent. In the previous sales, investors were buying gold Asians willingly at lower prices. Tells the traders in the Zafara’s Bazaar, the largest gold market in Mumbai, the tales of suffering similar to relate their American counterparts.

Said Dilip Tolijsana, director of a gold shop: “We have to stop gold as gifts quite small, now people are buying less quantities of gold by 25 to 30 per cent of normal for weddings.” Indians and lost interest in buying gold, but the collapse in the value of the rupee kept gold prices are high, because of the collapse of the dollar-denominated markets.

And caused the government attempts to limit the imports of gold, through the introduction of new taxes, in the further weakening in the demand side, which fell by 29 per cent in the first quarter, compared to the same period in 2011, according to one analyst at the World Gold Council.

According to Western Importers: The sales in the past two months, fell by 50 per cent or more on an annual basis. And contributed to a combination of weak demand in the West and in Asia in the making traders nervous. Says one senior banker: “I can see gold at $ 1400.”

According to the Marcus Group, from the World Gold Council, he sold some asset managers part of the possessions of gold. Barclays Capital said: The centers of investors in gold futures and options are up since at least December (December 2008).

In spite of this, few are willing to conclude that the upward trend has ended. Possibility of exit Greece from the euro zone, and weak economic data from the United States, and political uncertainty associated with the American elections are all factors that can awaken the interest in gold again. The central bank has been fixed for the purchase prices for the duration of the decline in prices. Said Jeffrey Currie, head of commodities research at Goldman Sachs: “We believe that the issue of rising gold prices remain the same.”

In fact, since the recent decline on Wednesday, gold rebounded by 5 per cent, and reached back to the $ 1600 yesterday.

Said Terry Hanlon, President of the minerals in the Dillon Gage Company for Trade and refining gold bullion: “We have started to increase in demand in the past two weeks.”

In Zafara Bazaar consumers already looking forward to a decline in prices. Komchmio say, a resident of the suburbs of Mumbai, “six months ago gold was expensive, we have been waiting for prices to fall, which is starting to happen now.”