Tuesday, July 09, 2013 / The Analyst
The extended bearish trend witnessed by gold continues as the precious yellow metal recently hit a 34-month low, the lowest in almost three years and also marking a record quarterly loss.
As highlighted in our last report on commodities , analysts are jumping on the bear wagon and not a few firms have updated their forecasts, expecting prices will continue to drop.
By far the most bearish of all is the award winning economist, Nouriel Roubini’ who set forth his reasons why Gold Prices would fall to $1,000 by 2015 in a June publication herewith summarized, viz:
1. Gold spikes during extreme crises. The crises are over.
2. Gold does well during periods when there's a risk of high inflation. That clearly is no longer a big worry, given how much central banks have unsuccessfully tried to stoke even modest inflation.
3. Now with the economy recovering, nobody wants to be in rocks that don't pay any dividends.
4. Real interest rates are rising. That kills gold.
5. Governments with debt issues are selling gold.
6. Gold was juiced by right-wing fanatics in the US. That boom is over.
Naturally, the market is nervous as a result of the cycle of negativity. Yet, not all investors have pressed the panic button yet.
According to Barry Ritholz, gold will indeed see a temporary rebound. However, what he has predicted next is not good news for gold lovers. He believes that there was a ten year uptrend in gold between 2001 and 2011. And with the current correction, the trend has clearly been broken. He therefore anticipates gold to go down further after a temporary rebound.
How much down? Well, the correction could be as much as a gut wrenching 50%! In other words, a US$ 600 per ounce gold cannot be ruled out.
At the international scene, gold has so far recorded a 26.3% loss in the year 2013 after witnessing successive positive returns in the last nine (9) years amounting to about 12.6% average return within the ten (10) year review period.
The Nigerian ETF Gold
The NSE New Gold Exchange Traded Funds (ETF), introduced in 2011, has recorded to date a -23.79% loss return subsequent to listing – effectively trading below its listing price.
The performance of the fund in the current year has naturally, on the back of global developments has not been impressive – posting a -24.03% negative returns to date.
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