The price of gold has hit a new low of $1222 an ounce. Since the start of April the metal has fallen 23%. One market specialist has referred to the fall as ‘capitulation’. It now seems a far cry from the 2011 record high of $1920 an ounce. To make things worse UBS, who are one of the biggest institutions in the market place, has slashed its own forecast for gold prices in a year to $1050 an ounce!
It is just not gold that is suffering. Most commodity prices have fallen since their respective peaks in 2011, copper prices are down 35% and iron ore prices have fallen 40% and, as with UBS and its forecast on gold prices, so commodity specialists are predicting further falls across the board. This is going to have enormous ramifications on the major producing countries. Already the Australian dollar has fallen 12% since mid April whilst the South African rand has fallen 14.5%. Not surprisingly the shares of commodity producers are under enormous pressure with for example Anglo American down 64% since their own peak in 2011. The market view is that there is more pain to come and certainly the two countries which I have highlighted, or regions of them, are in for a very tough 2 or 3 years.
Charles Little
4th June 2013
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