Gold Price Wrap-Up: Bullion Headed for Longest Losing Streak in Four Years

on May 17, 2013

Gold declined on Friday, May 17 for a seventh straight session and its headed for its longest losing streak in four years with holdings in exchange-traded funds (ETFs) shrinking and physical demand slowing down. The precious metal has been dragged down since the beginning of the week by gains in the greenback and comments by a US policy maker that the Federal Reserve might reduce monetary stimulus within months.

**Worst Slump since March 2009**
Gold shed 0.34 percent to trade at $1,380.91 an ounce by 05:38 GMT on Friday, May 17, after hitting a four-week low of $1,369.29 on May 16. Bullion is 17 percent down this year and is on track for its steepest weekly decline in a month. Gold for June delivery dropped 0.8 percent to $1,376.30 an ounce on the Comex in New York, also lower for a seventh day.

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While the gold price rallied in the past 12 years, this year rising confidence in the US economy has hurt demand for the precious metal which is seen as the world’s traditional store of value in times of economic uncertainty. Reserve Bank of San Francisco President John Williams said earlier this week that the Fed might begin slowing the pace of its $85 billion-a-month bond buying programme within months amid signs the economy was gradually gaining strength, whereas the programme could be ended later in 2013.

“The momentum has slowed significantly,” noted Jeremy Baker, a senior commodities strategist at Harcourt Investment Consulting AG, as quoted by Bloomberg. “The safe haven has definitely lost its gleam. We are in a declining phase here.”
**ETF Outflows**
Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, fell to their lowest in four years on Friday, May 17. According to Wang Xiaoli, chief investment strategist at CITICS Futures Co, the precious metal keeps flowing out of ETFs, which is going to depress prices. “You’ll get some buyers on the way down but that’s not going to be enough to stop the downward momentum,” Bloomberg quoted Wang Xiaoli as saying on Friday.

Physical demand was soft, with retail investors in India and China waiting for the gold price to either stabilise or drop further. “Many people are waiting on the sidelines as they are expecting another drop,” said Brian Lan, managing director of GoldSilver Central Pte Ltd, as quoted by Reuters.
**Getting “Crushed”**
!m[ETF Holdings Drop Further and Physical Demand Slows](/uploads/story/2328/thumbs/pic1_inline.png)

Credit Suisse (NYSE:CS) has forecast that bullion was poised to shed 20 percent in 2013, with inflation failing to accelerate and with the worst risks to the global economy waning. Credit Suisse’s head of commodities research Ric Deverell believes that gold will trade at $1,100 an ounce in a year and below $1,000 in five years.
“Gold is going to get crushed,” Bloomberg quoted Deverell as saying on Thursday. “The need to buy gold for wealth preservation fell down and the probability of inflation on a one- to three-year horizon is significantly diminished.”


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