Gold's rebound early in the year has petered out, as signs of U.S. economic strength and quiescent inflation have driven investors to other assets.
Gold soared 15 percent from the beginning of the year through March 14, but has slumped 7 percent since then. June gold futures traded at $1,292.80 an ounce on the Comex Wednesday morning, down $1.80 from Tuesday.
The holdings of SPDR Gold Shares, the biggest exchange-traded fund (ETF) made up of physical gold, have dropped to a five-year low,
The Wall Street Journal reports.
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Lessened signs of trouble in the global economy and financial markets have turned investors away from the precious metal.
"Gold is the quintessential super reserve currency," Bart Melek, head of commodity strategy at TD Securities, tells The Journal. "When times were bad, people didn't mind paying a premium to own it. But now that the existential risks have passed, that desire is no longer there."
To be sure, many investors haven't given up on gold for the long term.
The metal's correction from its 2011 record high isn't over yet, but it is ultimately headed higher, star investor Jim Rogers, chairman of Rogers Holdings, tells
GoldSeek.
Gold peaked at $1,923.70 an ounce in September 2011.
"There is going to be chaos out there over the next decade," Rogers predicts. "It could be a monetary disaster or even war. This turmoil could come from a gigantic debt problem, which could cause world economies to fall apart."
The only solution politicians know is money printing, he argues. "So that’s what they end up doing. We will see a wave of turmoil from all this that will surely take gold higher."
But first gold may fall as far as 50 percent from the 2011 peak, which would put it at $962 an ounce, Rogers notes.
Meanwhile, gold miners have fallen upon hard times,
The Journal reports. Many experts say the industry will have to consolidate further. Merger talks between the world's two biggest producers, Barrick Gold and Newmont Mining, recently collapsed.
The industry is confronted by declining supply in existing mines, which has pushed extraction costs higher.
"The nature of geology is such that gold does not occur in large volumes, but the capital exploiting it is robust," Douglas Groh, a fund manager at Tocqueville Asset Management, tells The Journal.
New discoveries have slumped in recent years. "Deposits are simply harder to discover," John Muntean, a University of Nevada professor of mines and geology, tells the paper.
Not all investors are abandoning gold miner stocks, however. Soros Fund Management, led by hedge fund legend George Soros, lifted its stake in Barrick Gold and gold miner ETFs in the first quarter.
"Some institutions are stepping up to buy gold this year just like you would expect them to do when they find an asset valued at these attractive levels," Adam Sarhan, CEO of Sarhan Capital, tells
Reuters.
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