They say all that glitters is not gold, but figuratively, even gold has been losing its glitter for three years in a roll now. The situation has been tormenting gold-backed funds’ investors.
For years prior to its implosion, gold was the recession-proof haven asset. Now it is in the longest slump – the worst since 2000 – as the dollar rebounded on the back of monetary policy tightening in the US. It has succumbed to the fate that has befallen the legendary commodities slump.
Just to indicate that gold has lost its appeal, Bloomberg notes that holdings in gold exchange-traded products have declined 10 times in the last 13 sessions to 1 466.45 metric tonnes, near the lowest in more than six years.
Gold’s woes are not entirely unique, Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, told Singapore based journalist through email. “Gold is suffering from the general exodus out of commodity investments. Being one of the most- traded commodities through ETF’s, the selling pressure from paper investors has been felt particularly hard and gold’s safe- haven status has suffered.”
Asked his opinion about how he sees the metal’s fortunes in 2016, Hansen said: Gold will face a tough challenge at the start of 2016 and prices may drop toward the $1 000 level before recovering toward $1 200 by the end of the year as the dollar and bond yields retreat.”