Investors are dumping gold because the unprecedented money printing by central banks around the world that pushed U.S. equities to a record last month has so far failed to spur inflation. Expectations for increases in consumer prices, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 20% this year, reaching a 17- month low today.
The surge in coin and jewelry demand seen in April when prices entered a bear market may not be repeated to the same extent now, said Walter de Wet, an analyst at Standard Bank Plc in Johannesburg. India, the top buyer, raised gold import taxes earlier this month to contain a record current-account deficit. Physical demand in North America and Europe has dropped 80% from April, Kitco Metals Inc. said in a June 18 report.
The U.S. Mint sold 34,500 ounces of American Eagle gold coins so far this month, compared with 70,000 ounces in May and 209,500 ounces in April, data on its website show. It still predicted this month that gold and silver coin sales may reach a record this year and the Austrian Mint said it expects “quite good business” in the next couple of months.
The Fed’s forecasts still showed most officials don’t expect to begin raising the benchmark lending rate from a record-low of zero to 0.25% until 2015. The Bank of Japan restated last week its April pledge to increase the monetary base by 60 trillion to 70 trillion yen ($715 billion) a year. European Central Bank President Mario Draghi said policy makers stand ready to act further if economic conditions worsen.
“The sell off from the Fed’s announcement, as well as recent declines on concern about an impending Fed easing of stimulus, is overdone,” said Adrian Day, who manages about $135 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. “Monetary policy globally remains very accommodative.”