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Gold Heading for Bear Market Plunges to Lowest Since July 2011

*from www.bloomberg.com, April 12, 2013 (To view original article click here.)

Take Away #1: Gold tumbled to its lowest price since July 2011, heading for a bear market, on signs that investors are favoring the dollar and equities as the global economy recovers.

Key Facts and Figures:

  • Gold deliveries plunged 4% to $1,503 an ounce at 11:11 a.m. on the Comex in New York.
  • Silver dropped more than 5%.
  • Silver futures for May delivery dropped 5.2 percent to $26.25 an ounce in New York, heading for the biggest loss since June.
  • The dollar rose as much as 0.5% against the euro today, and the S&P 500 Index reached a record yesterday.
  • Holdings in the SPDR Gold Trust, the top exchange-traded fund backed by bullion, reached 1,181 metric tons yesterday, the lowest in almost three years.
  • Through yesterday, prices slumped 6.6% in 2013 as global economies improved.

Take Away #2: Traditionally supportive reasons for buying gold don’t seem to work right now.

Key Facts and Figures:

  • “The argument for gold as a safe haven or protection against inflation just aren’t there,” says Frank Cholly of RJO Futures in Chicago.
  • “We have a risk-on market, with a lot of money pouring into equities. It doesn’t look good for gold,” says Cholly.
  • Minutes of the Federal Reserve’s March meeting released April 10 showed several members were in favor of pulling back on its $85 billion monthly debt-buying program this year.
  • Gold climbed for 12 straight years through 2012 partly as central banks expanded their balance sheets.

Take Away #3: Trading volume was up as gold prices declined.

Key Facts and Figures:

  • Gold prices declined as much as 4.7% to $1,491.40, the lowest since July 5, 2011.
  • Futures trading was more than double the average in the past 100 days for this time of day.

Take Away #4: Cyprus may sell gold holdings to cover possible losses from emergency loans.

Key Facts and Figures:

  • European Central Bank President Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks.
  • An April 9 debt assessment by the European Commission said that Cyprus had committed to selling around 400 million euros ($523 million) of “excess” gold reserves.
  • The Cypriot central bank responded to that disclosure by saying it hadn’t discussed plans for a sale.
  • The possibility of Cyprus selling gold “is a heavy weight on the market, and could set a bad precedent for other central banks looking to relieve pressures from austerity measures,” said Dave Lutz of Stifel Nicolaus & Co.
  • The Cypriot central bank manages 13.9 tons of the metal, according to the World Gold Council.
  • Central banks added 534.6 tons to gold reserves last year, the most since 1964, the London-based council estimates.

*To view original article from www.bloomberg.com click here.

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