According to a report from the Wall Street Journal,It’s time to crown gold this year’s biggest loser.
Gold for December delivery, the most actively traded contract, slumped Thursday to $1,243.60 a troy ounce, a four-month low, and spot gold was trading lower in Europe this morning. The yellow metal is down 26% this year, on pace for its biggest loss since 1981, when it fell 33%.
Gold had rallied for the previous 12 straight years, a streak that is in serious jeopardy less than six weeks until the new year.
So, what went wrong?
For years, gold was widely viewed as a safe haven during times of turmoil or as an inflation hedge against the Federal Reserve’s easy-money policies. Investors often hold gold as a hedge against rising consumer prices or depreciating currencies.
But that trade has failed this year.
Inflation expectations remain low even amid the Fed’s accommodative policies. And concerns that the central bank could start dialing back its bond purchases, either next month or early next year, have prompted the latest investor exodus out of gold.
“People are finding it hard to find a reason to own gold,” Adam Klopfenstein, a senior market strategist with Archer Financial Services,told WSJ’s Tatyana Shumsky.
Chart watchers say gold could be in for more short-term trouble. The precious metal slumped under its 50-day moving average earlier this month, a line in the sand that often dictates future direction.
Gold futures have dropped another $100 since falling below that technical marker. Chris Verrone, a technical strategist at Strategas Research Partners in New York, estimates it could fall to as low as $1180.
“Gold still looks like a good short in our view,” he said.
To be sure, there are some glimmers of hope for the precious metal.
Appearing at the Robin Hood Investors Conference in New York, hedge-fund manager David Einhorn told CNBC that he plans to keep holding gold “in case things go haywire.” His firm, Greenlight Capital, has the precious metal since 2008 and pointed out how it was a really good investment, up until this year.
Still, the fundamental and technical picture offer few signals immediately that would suggest gold’s recent retreat is poised to turn. If anything, gold prices will likely keep slumping before they get better.
“The precious metals markets are out of favor with investors and set to stay that way,” David Govett, head of precious metals at brokerage Marex Spectron in London, told the Journal.
