Gold Traders Seeking Floor After $66B Rout

Gold has further to drop in the rout that erased $66 billion from the value of investor holdings and took prices below the level some mines need to break even.

The metal fell to a 34-month low of $1,180.50 an ounce on June 28. Goldman Sachs Group Inc. says bullion will reach $1,050 by the end of 2014 and Credit Suisse Group AG anticipates $1,150 in about 12 months. Danske Bank A/S, the most-accurate gold forecaster tracked by Bloomberg over the past two years, predicts $1,000 in three months. Banks from Morgan Stanley to BNP Paribas SA to UBS AG cut their forecasts last month.

That reflects the biggest quarterly slump in at least nine decades as some investors lost faith in bullion as a store of value. With the total cost of producing an ounce of gold now averaging about $1,200 and billions written off the value of mining assets, some analysts anticipate contracting supply in the next several years that may help halt the retreat.

“In the long term it will provide big support, but in the short term it won’t really make any difference at all,” said Charles Morris, who oversees about $2.2 billion at HSBC Global Asset Management in London, referring to production costs. “I’m still bullish long term, but I just think we’ve got a big nasty bear market in the meantime.”


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell