GOLD PRICE NEWS - The gold price fell $10.50 to $1200.10, Monday as the price of gold continued its recent weakness. With today’s sell-off, the gold price is now lower by $43.55, or 3.5% in July, and is on track for its worst month since its 7.1% plunge in December 2009. The SPDR Gold Trust (GLD), which acts as a proxy for the gold price, finished the session lower by $1.02 at $117.34 per share.
Despite the recent weakness in the gold price, however, the yellow metal remains just 5.1% off its all-time high of $1,265 per ounce, and has posted a year-to-date gain of 9.6%. Nonetheless, sentiment toward the gold price remains tepid, with recent Hulbert Gold Newsletter Sentiment Index and Market Vane bullish consensus readings reaching their lowest levels since August of 2009.
Muted gold price sentiment readings were in full view as a successful institutional investor and a widely-read market pundit each presented an ominous outlook on the price of gold. Dr. John P. Hussman, President of Hussman Investment Trust, discussed his outlook on the gold price in his latest weekly remark, entitled “Misallocating Resources.” Hussman cited deflation fears as the main driver for his bearish view on the gold price, noting that “I continue to believe that the potential downside in gold exceeds the level that large holders are likely to experience comfortably, and would not be at all surprised to see a 30% loss in gold prices in the event - likely in my view - that deflation concerns emerge.”
James Altucher, founder of Stockpickr.com, went considerably further with his bearish gold price view in a Wall Street Journal article entitled “Why Gold Is the Worst Investment Right Now.” Altucher argued that purchasing gold right now “would be a horrible mistake” because of the poor long-term track record of the gold price when compared to the Dow Jones Industrial Average (DJIA). “Subtract out the costs of mining and storing gold, and what you have is basically a worthless rock that has a net negative return as an investment,” wrote Altucher.
Altucher went on to contend that part of the reason for the gold price’s outperformance of stocks in 2010 has to do with significant gold inflows from the likes of legendary investors John Paulson and George Soros. Furthermore, the recent poor performance of Paulson’s gold fund suggests that future investment demand is unlikely to remain as strong, according to Altucher.
As GoldAlert has discussed recently, tepid gold price sentiment has often corresponded with rises in the price of gold. The fact that Paulson, one of the most successful investors of the past decade, has been unable to attract more money to his gold fund with the gold price remaining near the $1,200 level illustrates the high level of skepticism toward the price of gold.
While Hussman and Altucher remain bearish on the gold price and gold related investments, one investment bank released a largely bullish report on the gold sector. Stifel Nicholas initiated coverage on a wide set of gold producers Monday, and assigned a “Hold” rating to several names, including Barrick Gold (ABX), Eldorado Gold (EGO), Goldcorp (GG), and Kinross Gold (KGC).
Four gold companies - European Goldfields (EGU.TSX), IAMGOLD (IAG), Newmont Mining (NEM), Osisko Mining (OSK.TSX) - received “Buy” ratings from the firm, with 12-month price targets of C$11.50, $24.00, $84.00, and C$15.00, respectively. In spite of the positive commentary, however, shares of EGU.TSX was the only one of the four to finish in positive territory - with a gain of 0.9%. Shares of IAG, NEM, and OSK.TSX finished the day lower alongside the gold price, posting declines of 2.4%, 0.6%, and 0.8% respectively.
