After an unnerving $45 fall on Wednesday, gold is trying to build support around $1,570 an ounce.
At these levels gold is down more than $330 from the all-time high above $1,900 an ounce set in August 2011.
The yellow metal is also getting dangerously close to straying into bear territory – officially defined as a 20% pullback. Wednesday afternoon gold briefly touched $1,555 – that’s an 18.5% retreat from the record high.
Here is a roundup of some of the reasons why gold’s “long up cycle from 2001 to the present is very likely hitting an inflection point“:
- The largest ETF, SPDR Gold Trust (GLD), is on track for its biggest outflow since August 2011
- Hedge funds and banks have been liquidating their positions – long holdings in GLD are the lowest in four years
- Gross short futures on gold are close to a record high
- There is a distinct cooling at the US Fed for quantitative easing
- The structural role of gold when it comes to monetary policy is being questioned
- All the talk about “currency wars” did not, as expected, benefit gold
- The renewed appetite for riskier assets like stocks and bonds which unlike gold pay interest and dividends is causing rotation out of gold
- Gold’s role as a safe haven against systemic risk is slowly fading away
- An improving US economy leading to a stronger dollar is hurting gold which tend to move in the opposite direction
- Anecdotal evidence from online gold stores suggest retail buyers of coins, bars and certificates have unprecedented fear of further price falls
- The 2,000 tonnes held by ETFs could flood the physical market when investors exit
- Number one consumer India is actively trying to throttle domestic gold demand
- Even robust physical demand from China and central banks will be overwhelmed by the much bigger financial transaction side of the market
Read more at the FT (paywall), MarketWatch, Bloomberg, BusinessWeek, Reuters, Business Insider and Goldcore.