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How Much Further Can Gold Fall?

Eric Dutram

While markets have been a little sluggish lately, trading in commodities has been downright brutal. In particular, safe haven commodities like gold have taken the brunt of the selling pressure, as a strong dollar and surging bond yields have dulled the appeal of the yellow metal.

Prices of gold are now trending near three year lows, and the metal could set a new record for the biggest quarterly loss in its history. Plus to top things off, there are growing concerns over demand from key emerging market nations—like China and India—which could further add to gold’s woes in the near term.

This trend has also led to terrible trading in gold mining stocks as well, as these often trade as a leveraged play on gold. Thanks to this, these have done even worse than precious metals so far in 2013, plunging by over 50% in many cases for the trailing six month period.



6 Month Performance

S&P 500 SPY


Gold Bullion GLD


Gold Miners GDX


As you can see, the space certainly hasn’t been one to be in for much of 2013, broadly underperforming stock markets for the time period in question. Still, there is some hope for the segment going forward, especially if volatility returns and bond losses continue to pile up.

If investors still see red in their bond portfolios, and if the dollar’s surge is halted, gold could be back on track in the second half of the year. After all, GLD is still outperforming SPY from a trailing five year look, so recent history is definitely on the precious metal’s side (though this may not be the case much longer at this rate).

But what do you think about the gold space right now? Does the metal have further to fall, or is this an incredible buying opportunity?

Let us know in the comments section below!

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