Gold at $ 350? SPDR Gold Trust (ETF) (NYSEARCA: GLD) buyers warned
Buyers of SPDR Gold Trust (ETF) are at risk. Those who held ETF shares have lost more than 7% since the start of the year. “Store of value” may no longer be the best way to think about gold and nothing scares gold bugs more than the whispers of “secular bear market. “
Claude Erb, a former TCW group commodities trader, saw the fall in the price of gold come back in 2012 before the sell-off began. He is now warning that gold could drop to as low as $ 350 an ounce as surprised traders escape falling prices and lose confidence in the value of the yellow metal.
The gold market could oversold
Mr. Erb made these comments to Mark Hulbert at MarketWatch. The $ 350 figure is based on the fair value of gold which he estimates at $ 825 in the current market. Erb says that in bear markets gold is oversold as downside risks drive those looking to secure their savings in metal and hedge against inflation.
The bearish target of $ 350 is based on the gold sale during the collapse in the price of metal in the 1970s and 1990s. Mr. Erb says gold bulls are going through stages of mourning. When he published his first report with Professor Campbell Harvey of Duke University, they were in denial.
Now they have moved on to negotiation. When the price of the metal drops below $ 1000, they will get angry and once it crosses the $ 825 level to hit $ 350, they will start to sink into depression and eventually agree.
Mr. Erb’s price target of $ 350 may seem a little high, but targets of $ 1,000 or less have become common since the price of gold hit its current decline. SPDR Gold Trust (ETF) buyers felt every bump to the downside.
Gold lowers its head
With a rate hike coming before the end of the year, at least if the Fed ho-hum report Wednesday is rubbish, and more and more in the years to come, Wall Street seems to be turning to gold.
UBS’s Ramin Nakisa appeared on CNBC Thursday and called gold a “wasting market.” He said the absence of a gold bump from the crisis in Greece was very telling for the future of the metal. Normally, says Nakisa, a small crisis like this would send investors to gold for their safety. This just didn’t happen in 2015.
Those who love gold and much of their savings in SPDR Gold Trust (ETF) stocks are hoping the more bearish Wall Street analysts are wrong, but it is clear that the dynamics that drove the price of the ETF at over $ 180 in 2011 are no longer driving the market.
The price of gold rose a fraction on Thursday morning, but was still trading below the $ 1,100 level which was seen as a key support level until very recently.