Tags: gold | funds | prices | China

Global Gold Prices Hit a Trough in 2013, Look for the Next Big Move

By John Morgan   |   Wednesday, 19 Feb 2014 01:44 PM

Investment funds sold off a staggering $40 billion worth of gold in 2013, swamping global demand for gold bars, jewelry and coins, as a more optimistic world economic outlook encouraged a switch into riskier assets.

But the rout in gold prices — they dove almost 30 percent last year — would have been much worse without burgeoning consumer demand in some countries, particularly in China, according to CNNMoney. During 2013, China eclipsed India as the world's biggest market for gold.

"There was a huge movement of gold from West to East," Marcus Grubb, managing director of investment strategy at the World Gold Council, told CNNMoney.

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While billionaire investors like George Soros and Daniel Loeb trumpeted that they dumped their gold exchange-traded fund (ETF) holdings, Grubb predicted those kinds of moves by big funds and mega-investors may have run their course now.

Among small investors, global demand for small bars and coins increased 28 percent in 2013, a record high, CNNMoney noted. And demand for gold jewelry rose 17 percent, its biggest hike since 1997.

Gold prices may have bottomed out, at least temporarily, in 2014. The SPDR Gold Shares ETF is up almost 10 percent this year, and the price of the metal is above $1,300 per ounce for the first time since November. Gold for April delivery was trading at $1,313 per ounce early Thursday.

Frank Holmes, CEO of U.S. Global Investors, told Kitco News he expects gold prices are headed to $1,400 per ounce in 2014.

Holmes predicted an increase in the Consumer Price Index, an improving economy and higher interest rates will help push gold prices upward.

Global investor Felix Zulauf of Zulauf Asset Management wrote on his blog that he expects a final "wash-out" in gold prices this spring, but then predicts prices will be on the rise for a longer period.

"Since the gold market is very oversold from a cyclical point of view after declining from $1,920 to $1,180 in more than two years, investors should take a constructive and contrarian view of gold and accumulate step by step on weakness," Zulauf advised.

"It may take a few more months until the dimension of risk in the credit system become more visible, but I expect this to be on the table in the second half at the latest, when the price of gold should be higher again. Even gold mining stocks can be purchased with a 12-month view, as they have been beaten down badly and are cheap on a valuation basis. They are, however, not for widows and orphans."

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