“The underpinnings of the gold bull case are really bad,” Brian Barish, president of Denver-based Cambiar Investors LLC, which manages $7 billion, said in an April 15 phone interview. “The big move in gold, almost all of that, was based on a mistaken belief that the Fed’s unconventional monetary programs were going to cause imminent inflation and potential hyperinflation in the U.S. and elsewhere, and nothing like that has happened.”
Goldman Sachs told investors to sell the metal the same day, cutting its 12-month forecast to $1,390 from $1,550. The turn in the gold price cycle is accelerating after a 12-year rally as the recovery in the U.S. economy gains momentum, analysts Damien Courvalin and Jeffrey Currie wrote in an April 10 report.
Gold sank into a bear market two days later, plunging 4.1% on April 12 after U.S. retail sales fell the most in nine months and consumer sentiment unexpectedly declined. Citigroup Inc. predicted in a note that 2013 would be the year that “the death bells ring” for the commodity supercycle.
An unexpected slowdown in China’s economic expansion sparked a commodity selloff that sent gold to the biggest plunge in 33 years on April 15. Trading volume in the SPDR Gold Trust soared to a record 93.8 million shares, according to data compiled by Bloomberg. While it fell to 45.7 million yesterday, it was about four times the average since the 2004 creation and among the 15 largest trading days ever.
“The initial price drop of gold, all of the sudden people became aware,” Tim Ghriskey, chief investment officer of Solaris Asset Management LLC and co-founder of New York-based Solaris Group, which oversees more than $1.5 billion, said in an April 15 phone interview. “Everyone flocked to the exit doors at one time.”