On Friday, more than 22 million shares of Barrick changed hands as the price plummeted some 5% to the lowest seen since 1990.
Gold has no friends left, only believers as the price collapsed to the lowest level since April 2010 after the Fed said the world’s largest economy favors a rate hike counter-trend to Europe before year-end which has strengthened the dollar. This was augmented by China announcing it has diversified its foreign reserves placing only 1.6% in gold – a number that took the wind out of the gold conspiracy that China would back its currency with gold.
The gold market has turned increasingly bearish with the once large gold futures investors such as hedge funds slashing long positions. The holding of such funds has collapsed falling below 1 million ounces reaching new nine year lows. As European austerity becomes widely seen as just insanity, the big money is starting to see the writing on the wall – buy dollars.
So, for those of you who told me the Euro was "it", and to sell the dollar, I say "told you so!" Our dollar play has done very nicely, thank you.
The sell-off in gold was led by Barrick Gold Corp (NYSE:ABX, TSE:ABX), which is the world’s leading producer as its shares fell 5% to the lowest in USD terms since 1990. Barrick’s market value is now down 32% over the last three months alone bringing its market-cap to just under $14 billion in New York down from $64 billion at its peak in 2011. Barrick’s gold production is expected to fall further as it faces an oppressive debt-load of more than $13 billion – an amount equal now to nearly the total value of shares. This warns that a rate hike may see the value of Barric collapse even further.
Denver-based Newmont mines is actually the only gold company that forms part of the S&P500 index and is the second largest producer fell just under 3% on Friday. ADRs of AngloGold Ashanti (NYSE:AU), the world’s third largest gold producer in terms of output fell 5.8% for a market value of $3.1 billion on the NYSE.
We will keep our subscribers posted as to when to enter the next bullish cycle for Gold and Silver.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.