Losing Faith in Gold From Ghana to Vancouver Proves Rout – Bloomberg 08-13-13

Salient to Investors:

Gold’s swift fall has ravaged livelihoods around the world, while investors who lost big are shifting assets elsewhere and scaling back retirement plans. The market value of the world’s gold mining companies is down $271 billion since the September 2011 peak of $486 billion. Gold hit $850 on Jan. 21, 1980, or the equivalent of more than $2,400 today after inflation and did not top $850 again until 2008.

Michael Aronstein at Marketfield Asset Mgmt said the giant, decade-long rally will not be repeated, at least in my lifetime.

ABN Amro predicts the price will average $1,000 in 2014 and $840 in 2015 because a stronger US economy will limit gold’s appeal.

Edward Lashinski at RBC Capital Markets said the foundation for gold has eroded, and capital is better deployed in other enterprises that actually see a return.

William Fleckenstein said people own gold because they do not trust the central banks and the price will be much, much higher within 5 years and stocks will crash again. Fleckenstein wrote that the Fed caused repeated asset bubbles with artificially low interest rates.

Seasoned forecasters say gold’s future price is hard to predict because it is driven more by sentiment than standard measures of supply and demand. Gold bulls cite the surge in jewelry buying and 9 consecutive quarters of net buying from central banks. Bears say the banks often buy at the wrong time.

Ronald Wildmann at Basinvest said gold is still a bubble.

Morningstar said 2,273 US-based mutual funds, or 32 percent of the funds it tracks, have an exposure to gold bullion, mining or exploration.

Kevin Telmer at Artisanal Gold Council said the gold boom rippled out to as many as 10 million gold miners and 50 million others who sell them merchandise or services- people switching from farming could expand their earnings as much as fivefold.

In April, Societe Generale declared the end of the gold era. Goldman Sachs predicts $1,050 by the end of 2014.

The median Vancouver mine exploration company has $325,000, enough to last less than 5 months. The largest mining companies argue they can weather gold’s decline by cutting overhead costs, paring exploration and writing down assets acquired during the boom.

Daniele Donahoe at Rinehart Wealth Management said with the advent of ETFs people have been able to become somewhat of their own worst enemy.

John Reade at Paulson & Co. said the long-term trend of increasing demand for gold in lieu of paper is intact.

Bruce Zimmerman at Utimco said gold represents less than 4 percent of assets, encompasses 5 to 6 percent of our thoughts and discussion but generates 99 percent of our publicity. Zimmerman is not selling because, given easing monetary policy, there is a scenario where financial assets essentially become devalued.

Jim Hille at At TCU Endowment prefers oil and gas royalties, which produce income, as gold does nothing for your payout needs every year.

Nick Holland at Gold Fields said the industry is not sustainable at $1,230 an ounce, and we need at least $1,500 an ounce to sustain this industry in any reasonable form.

Read the full article at  http://www.bloomberg.com/news/2013-08-13/losing-faith-in-gold-from-ghana-to-vancouver-proves-rout.html

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