With international gold prices falling for the first time in twelve years many investors, institutional and individual, have seen a huge chunk of their wealth wiped out. We’ve already looked at John Paulson‘s loss of $1 billion of his own money, and the real explanation for the shift in prices, but many more investors have seen their fortunes crumble. Here’s a look at the biggest losers from the decline in gold prices.
Ron Paul: A cornerstone of libertarian rhetoric in the twenty-first century America has been the dangers of using fiat money to represent wealth. Threatening massive inflation from excessive printing of money by central banks, Ron Paul and his son Rand have been toeing, and repeating, this line for year.
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Ron Paul has put a lot of his own money down on this idea, and a huge amount of his base has done the same. If Americans are investing on the basis of a politician’s theories and they’re losing money, the tide is sure to turn against that politician, at least in the short term.
Peter Schiff: Peter Schiff is the CEO of Euro Pacific Capital. For years he has been advocating, and predicting, the use of gold as real currency. He not only believes that the metal should be used to back up paper, he thinks the world’s best bet is to trade the metal for goods and services. Though not directly related to those arguments, the large drop in the price of gold will leave many questioning his theories.
Morgan Stanley (NYSE:MS): This cornerstone of international finance has been advising investors to invest in gold for a long time. The bank may have given a lot of bad advice to its investment clients in 2012, but their prediction that gold would hit over $2000 in 2013 may have been their worst call. The bank was openly advocating investment in the metal through March.
One of the good calls the banks made last year was advising its clients to exit positions in funds ran by John Paulson. Any who kept their money with Paulson through today will be regretting that decision. The investment bank will take a big hit to its reputation from their advice on gold, however.
Gold Mining Companies: Commodity markets can be one of the simplest to model, and a new Bank of America Corp (NYSE:BAC) does just that. According to the report, with gold trading at $1375, about 10 percent of gold companies are cash negative. If the price slides, things become much worse.
At $1200, an estimated 20 percent of gold producers are cash negative, if prices fall to $1000, Bank of America Corp (NYSE:BAC) estimates that half of the global gold industry will be essentially worthless. The most highly leveraged companies, those most effected by a fall in gold prices, include Sibanye Gold Ltd (NYSE:SBGL), and Wits Basin Precious Minerals, Inc. (PINK:WITM). The safest play, according to the report, is Range Resources Ltd (LON:RRL) (ASX:RRS).
Kyle Bass: The maven who has long been predicting financial crisis, has gone very deep into gold. Three days before the crash he lamented the metal’s low price, and in 2011 he convinced his Alma Mater, the University of Texas, to buy $1 billion in gold bars. Bass almost certainly still believes that the world, Japan in particular, is heading toward a crash, so he’s probably not giving up on his gold bet just yet.