puts things in perspective..... look at those declines in all gold stocks around the world! We surely must be near bottom? ------------
from Mineweb
HARD TIMES, SOFT METAL Has gold bullion lost its compass?
During a season of unrelenting fear, risible if it were not so overwhelming, gold bullion has locked the bulls into the stadium, and left. Author: Barry Sergeant Posted: Thursday , 16 Oct 2008
JOHANNESBURG -
On Thursday, the dollar gold bullion price lost USD 40 an ounce, within minutes, shortly after trade started up in the Americas. The price plunged through the USD 800 an ounce level, before bouncing up a bit, and then fell again, for losses of more than USD 50 on the day. Looking at headlines over many months, gold bulls outnumber bears by at least 10 to one, but bullion has persistently declined Tsunamis of encouragement in the form of endless calls to move once again above USD 1,000 an ounce.
That magic number - USD 1,002.95 to be exact - was cracked in March this year, at the height of the Bear Stearns crisis on Wall Street. Since then, the credit markets crisis has only intensified, especially after the collapse on 18 September of Lehman Bros., also on Wall Street. The credit markets crisis has moved, like a hellfroth, over all other markets: investors, consumers and governments are numb with terror, at worst, and pulverized, at best.
There have been endless sensational headlines, but, make no mistake, price movements in markets, which can be objectively observed, have shown a relentless flight from risky assets: only the degree varies. Among the major traded commodities, gold has performed relatively well; among precious and base metals, it has underperformed the least.
But the takeaway point is that during a season of unrelenting fear, risible if it were not so overwhelming, gold has seemingly failed to live up to not only price expectations, but, more important, it has failed to convince as a safe haven asset, or as an alternative monetary asset, or as the "anti-dollar".
The numbers show that the safe haven prize goes to the dollar, followed by the yen. Leaving aside the cost of raising debt, which can be characterised as a negative rise, prices for everything else have been falling, be it equities, commodities, or property. The dollar's rally, which kicked in on 15 July 2008, has also been counterintuitive, given the hundreds of billions of dollars that the US government will raise in the form of Treasury bonds to finance the would-be rescue of the country's financial services system.
Seen from a cash flow viewpoint, however, the flight to safety has identified US Treasury bonds as a natural home for cash when other assets are liquidated. These interest-paying dollar instruments are backed by the biggest economy in the world that, by definition, would be the last to go down if the entire global economy falls over. Even in that putative post apocalyptic world, dollar denominated paper would likely open the gates in the exit from Armageddon.
The timing of the dollar's rally has also done nothing for gold. The greenback moved into a bear market in January 2002, and found a bottom in April this year, before its decisive upward turn in mid-July, from a near-bottom. For years, the dollar has exhibited an inverse correlation with most dollar commodity prices, and especially so with gold bullion.
All else being equal - which has certainly not been the case - the rising dollar has made gold bullion more expensive in other currencies, which is no small factor in developing economies like India, the world's biggest consumer of gold bullion for both investment and ornamental uses.
Gold bullion exchange traded funds (ETFs) - such as the NYSE-quoted SPDR gold trust which now holds USD 20bn worth of physical bullion - have become new investment stars, but have also shown that this new gold market has limits. There is also evidence that gold ETFs have been increasingly cannibalising investor flows that went, prior to the launch of the ETFs in 2004, into gold equities.
Where the rise or fall in the value of ETF units moves lockstep with changes in the gold price, listed gold stocks have been sold down the river, along with the wider resources sector. At the time of writing, while the dollar gold price was down by 23% from its March highs, the price of SPDR units were 22% off highs, but the average listed gold stock - and there are dozens around the world - has surrendered two thirds of its value.
(20min delay)