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The Great Gold Rout

THE GREAT SAXO CAPITAL MARKETS GOLD ROUT Is this the end of the bull market? OUNCE FINE GOLD After a decade long rally, gold recorded its biggest two-day drop in 30 years during April. What caused this sudden decline? Is the gold cycle over, or is this just a dip in the market? $260 $500 $1000 $1500 $1909 $1600 $1350 2001 APRIL 2005 2009 2011 2011 2013 2013 NOVEMBER SEPTEMBER APRIL AUGUST APRIL 12 APRIL 15 A big technical break below the support level 2011 2012 2013 AUGUST APRIL 1800 1500 The drop followed the breach of an important break below the 1,525 USD/oz level, which was sparked by news that Cyprus plans to sell its gold reserves. Gold rush in the Eurozone? GOLD RESERVES IN TONNES 2435.4t FRANCE 4th world's largest reserve 382.5 t PORTUGAL 12th world's largest reserve 2451.8t ITALY 3rd world's largest reserve 111.9t GREECE 30th world's largest reserve 281.6 t ....................... SPAIN 18th world's largest reserve 13.9 t The prospect of a far larger sell-off by other indebted nations like Italy and France, which hold vast amounts of gold, is thought to have added to the decline. CYPRUS 55th world's largest reserve Gold ETP holdings sharply reduced +263 t +241 t +205 t 166 t 371t 634 t 876t 2004 2005 2006 2007 +342 t +651 t +314t 1190 t 1842 t 2185 t 2008 2009 2010 +275 t -291 t +171t 2356t 2631 t 2340 t 2011 2012 2013/ APR TOTAL OUTFLOWS 2013 100 TONNES IN ETPS HOLDINGS 291.3 t INFLOW OUTFLOW A decline in Exchange Traded Products backed by gold is also thought to have contributed to the fall in price. Total outflows rose to 291 tonnes in the first four months of 2013 after consecutive net inflows in ETPS since 2004. How many ounces of gold does it take to buy the Dow? 2007 2011 2013 AUGUST 31 AUGUST 22 APRIL 23 20 oz 13357.74 10.36 oz 14719.46 10854.65 5.78 oz The rout in gold is also a sign the global economy is recovering. A stellar stock market performance in recent months has served to remove the general appetite for non-coupon investments like gold, which has declined in value relative to the Dow Jones Industrial Average since 2011. 1 OUNCE DOW JONES Where next for gold? Much will depend on how long major central banks like the Federal Reserve will pursue inflationary policies and whether gold will retain its status as a safe haven asset. GOLD FUTURE PRICE (AS OF APRIL 30, 2013) INFLATION GOLD PRICE FOMC INFLATION US CORE PCE FORECAST DEFLATOR 2% 1.9% 1.8% 1.7% 1.6% 1.6% 1.5% 1.3% $ 1214 YEAR 2008 2009 2010 2011 2012 2013 2014 2015 SOURCES: Federal Reserve Bank of St Louis FRED Economic Data: World Gold Council, Gold Demand Trends 2012: Bloomberg Market Data: Federal Reserve: This infographic has been produced for information purposes only and should not be considered as investment advice. Trading margin products can result in losses that exceed your initial deposit. Saxo Capital Markets UK Limited is a company authorised and regulated by the Financial Conduct Authority, registration Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. ANNUALUS INFLATION $ 879 $ 972 $ 1537 $ 1567 $1462 $ 1470 - $ 1475

The Great Gold Rout

shared by saxomarkets on May 20
After a decade long rally, gold recorded its biggest two-day drop in 30 years during April. What triggered this sudden decline? Is this precious metal in bubble or is inflation going to revive its sta...




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