Don Coxe:a Note for Listeners
April 15, 2013
THE COLLAPSE IN GOLD
There was no overt hint of the impending carnage as the First Quarter ended withGold trading at $1604 an ounce—down from the high trade this year of $1695, butnot suggesting that a stunning, record-breaking plunge was coming with AprilShowers.On Friday April 12
, we made scant mention of something happening in gold in aConference Call devoted to the legacy of Margaret Thatcher. Thereafter, Gold’sdive took investors by surprise, as it fell from $1550 and briefly broke $1500 beforeclosing at the somewhat suspicious prices of $1501.But the real drama was saved for Sunday evening, as Asian markets opened andgold resumed its swoon, falling quickly to $1440. As Europe and then NorthAmerica opened for trading the plunge became a full-blown panic, reaching $1355by mid-Monday-morning before rallying weakly.By then, media commentators were issuing a flood of explanations.Among them:
oil prices had been declining for weeks and both Brent and WTI haddropped sharply in recent trading; when the commodity that hashistorically been the most important inflation generator startscontributing to falls in CPI, can gold be far behind?
industrial metal prices had fallen sharply in response to evidence of slowing in China; on April 15
, China announced its quarterly GDPgrowth had not been 8% as initially estimated—just 7.7%.
grain prices had been softening in response to USDA estimates of record-breaking corn crops—with further robust numbers forsoybeans and wheat.But the most crucial rumors were about Cyprus. The mini-nation with the 61
largest holding of gold was going to have to sell its treasure to meet its pressingfinancial needs. That was enough to set off rumors of a concatenation of PIIGSsales of gold—to cover the deficits of Portugal, Italy and maybe even Spain.