The Year in Review: 2013 The Year in Gold

There is an old saying that what goes up must come down and that saying certainly held true for the gold market in 2013. The highest gold price reached in 2013 was US $1,693 on January 2, 2013.

Prior to that it appeared that the sky was the limit for gold. In 2011 the price gold touched on US$1,800. As 2012 unfolded the price of gold hovered  between US$1800 and US$1700. But  over the first six months of 2013 the price of gold began its steady decline.

By the time of the Prospectors and Developers Association of Canada Conference the first week of March in Toronto, 2013 the prices slipped to US$1,579. The four letter g-word - GLUT- was heard spoken by men in the know at PDAC. Was it possible you could have too much of a good thing? Was too much gold being produced? In classic economic theory when supplies begin to outgrow demand the price falls.

But the price didn’t stop falling and by June 28 2013 the price had plunged by US$479 to a two year low of US $1100, before making a rally to US$1350 by October 31.  It dipped again under US$1200 before rising to current level US$1204.Net result for 2013? A US $489 drop in the price of gold from US$1,693 to $1,204 on December 31, 2013.

For a day by day listing of 2013 gold prices visit http://www.usagold.com/reference/prices/2013.html

The rather drastic drop in price from March to June 28 2013 led at least one mining information organization PINNACLEDIGEST.COM to argue that the sudden and dramatic plummet in the price of gold was caused by a sell-off of 1,300 tonnes of gold by the Bank of England during that time. For the full story click on the following link http://www.pinnacledigest.com/blog/dscaron/rigging-gold-market-part-2

Reuters News Agency also reported on the large movement of gold out of Britain. During the first eight months of 2013 1,016 oz. of gold were shipped out to Switzerland at for re-refining before being transferred to Asian market. This compared to 85 tonnes shipped out of Britain in 2012 http://www.reuters.com/article/2013/10/18/gold-etf-uk-exports-idUSL6N0I723P20131018

Reuters went on to report that investors were jumping off the gold bandwagon that had carried them to such dizzying heights because US stocks which had been poorly performing since the recession were now beginning to take off and seemed a more attractive investment than gold.

Other gold experts point to the June 20, 2013 announcement of Ben Bernanke, the Chair of US Federal Reserve when he announced that the fed would slow the flow of stimulus money and eliminate it over the next year http://www.marketwatch.com/story/gold-prices-drop-as-fed-signals-stimulus-slowdown-2013-06-20

After Bernanke’s announcement gold for August delivery dropped $87.80, or more than 6%, to end Nymex floor trade at $1,286.20 an ounce -- the lowest closing level since September 2010, according to FactSet data. A week later on price of gold bottomed out for 2013 at US$1100.

Less conspiratorial factors to consider when evaluating the performance of gold are the strengthening of the U.S. economy since the Great Recession was officially declared over in 2010. The United States pulled out of Iraq in 2011 and by the end of 2014 will have withdrawn their troops from Afghanistan ending that 13 year war.

Gold always seems to soar during periods of intense instability and uncertainty.

A glance at a twenty year chart of gold prices shows the price of gold started to take off shortly after 9/11 and then really blasted off after the US recession of 2008 which lasted until just recently. For a rather interesting perspective on gold price take a look at this 20 year chart produced by http://www.usagold.com/gold-price.html

The two things gold investors can bank on is that first gold will be the investment of choice during difficult and uncertain times. The second thing is that we as humans lurch from crisis to crisis- war, economic recession, man-made and natural catastrophe. The next crisis is just around the corner. Don’t panic just ride out the cycle.

As for the question of too much gold being produced – we will examine how gold companies have responded to the drop in gold price tomorrow…Happy New Year!