Gold investors rush for the exits again on Monday following Friday's stampede. Bullion has its biggest 2-day fall in 30 years. The direction of travel may not be a surprise but the speed is, according to Matthew Turner, Precious Metals analyst at Macquarie.
"I think what's happened is the gold market was already bearish. We had a bearish call on gold since March. We expected it to go down to 1,480 by the end of the year and 1,380 by the end of next year. And that bearishness in the gold market has been hit by bearishness in other markets. And investors, instead of buying gold, are selling gold and heading for the exit in large numbers.
(QUESTION: Now are they selling gold to perhaps cover losses elsewhere, in other assets, other markets or is a fund in trouble, for example? These are the things that crop up when there are moves of such great magnitude.)
Yeah. I think a move of 5% in one day doesn't always relate to fundamental changes in the gold market. But there is some of that, as you say, other markets are selling off so gold is selling off. But remember that gold investors have been selling gold all year and so I think it's continuation of that trend.
(QUESTION: You did say there it was the worst two-day run for some years, I think, by my calculations is worth two-day run for 30 years? 3-0.)
Thirty years. Okay, even I can't remember that. So I started in the gold market in 1999 and then the price was 250 dollars an ounce. Today, it's still more than five times higher than that.
(QUESTION: So okay, I mean if you are a buyer then, if you bought, for example, some of the UK's gold that Gordon Brown sold then, you'd be quids in though.)
That's right. And also, although we have a bearish view on gold in the short term and that view has come true, I think there are fundamental differences in the gold market now than they were in 1999 when Gordon Brownsold. So we still see strong jewellery demand from India and China. We see strong central bank buying from Asia.
Yeah, that's right. One of the other reasons the gold market has been in a bearish condition is that India, which is the largest consumer of gold, has been trying to reduce its gold imports and also the Indian economy is doing very badly. So this reduces the demand for gold jewellery, which is one sector that tends to take up the slack when gold investment demand is weakening."