The gold trade is flat this morning, following its worst quarterly drop since daily trading began in the mid 1970s. Despite a small gold rebound, prices remain 35% below the record high reached in September 2011, which topped $1,900 an ounce.
The latest fallout from the drop: a delayed opening for Barrick Gold’s (ABX) Pascua-Lama mine deep in the Andes on the border between Chile and Argentina. The world’s largest gold mining company, measured by output, announced Friday: “In light of challenging market conditions and materially lower metal prices, the company intends to re-sequence construction of the process plant and other facilities in Argentina… to target first production by mid-2016 (compared to the previous schedule of the second half of 2014).”
Barrick gold fell as much as 4.2% on Monday before closing down 3% at $15.25.
“You’ve had a 10-year uptrend in gold since 2001,” says Barry Ritholtz, CEO of Fusion IQ. “That trend is clearly broken… Gold is now in a bear market.”
But will it stay there? Ritholtz doesn’t think so.
“I wouldn’t be surprised to see a nice bounce in gold from this level up to $1400, $1440, but I don’t know if it’s sustainable after that.” His advice to investors: “Hit the bid” once gold climbs to near $1400... $600 to $800 an ounce is certainly a possibility.”
Ritholtz says gold is no different from other asset classes, despite what many goldbugs say. “There’s nothing magical about gold. It’s not imbued with special powers. It will trade on human beings making buy and sell decisions, and that pattern is pretty well established.”
What Ritholtz doesn’t buy is the bull market narrative of gold bugs: “That the Fed is printing money, the dollar is going to hell… and hyperinflation is coming... [along with]$10,000 gold." Ritholtz says, “None of that is true, other than the Fed printing... and the dollar is at multi-year highs… but that’s not a good thing for gold.
For more on where gold is headed watch the accompanying video. And note that when Apple stock was trading near $600 in November 2012, Ritholtz told The Daily Ticker it could drop to $500. Months later when Apple was trading well below $500 he warned investors to NOT fall into a "bear trap" expecting $350 a share. He was right again.
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