Gold Prices Recover After Record Quarterly Drop

Gold recovered on Monday after posting over 23 percent loss during the last quarter, amid easing stock market and steadying dollar.

Gold Prices Recover After Record Quarterly Drop

The precious metal on Friday closed the second quarter with a 23 percent loss, the worst quarterly decline since modern trading began in the mid-1970’s.

Last week, Gold futures plummeted below $1,200 a troy ounce, as U.S. economic data topped analysts’ estimates.

However, the recent comments from a U.S. Federal Reserve official on the need to maintain the bank’s stimulus measures for longer, helped gold recover some of the previous week’s losses when it fell 5 percent to three-year lows of $1,180.71 an ounce.

Earlier, Federal Reserve Chairman Ben Bernanke hinted that the U.S. might begin tapering its massive bond buying program. As a result, the view of gold as a safe haven for investors became damaged. If the Fed does begin tapering off its $85 billion per month bond purchases, then interest rates would likely rise, which would make gold less of an interest for investors.

Gold Price Recovers

On Friday, dollar index retreated from a four-week peak, while European equities shown signs of easing thanks to poor China’s factory activity data.

Now, investors attention would turn to key events during the week including Friday’s report on U.S. payroll and the European Central Bank’s policy meeting on Thursday. The strong U.S. payroll data would enhance treasury yields and the dollar.

Several hedge funds have lost substantially during the recent fall in the gold prices. David Einhorn’s Greenlight Capital Management’s offshore gold fund plummeted 11.8 percent in June.

Poor Physical Demand

The recent fall in gold prices has not rekindled enhanced interest for the physical gold in the traditional Asian market. However, during April the Asian demand cushioned the precipitous fall in the precious metal’s price.

During its last week report on metals and mining sector to clients, Deutsche Bank AG (FRA:DBK) indicated strengthening of the U.S. dollar, unwinding of the global carry-trade and tame global inflation accentuated the commodity complex.

The recent fall in the precious metal prompted Barclays PLC (LOND:BARC) analysts to trim their 2013 forecast for the yellow metal to $1,393 an ounce from $1,483.

About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports