The recent gold price bubble is deflating with the precious metal losing more than 15% in value and mining companies' stocks taking a hammering in the process.
Three weeks after hitting a record price of $US1921 ($NZ2465) an ounce on September 6, spot gold was trading down more than 15% on the international markets yesterday around $US1627.
Shares in Australia and Asia's largest producer, Newcrest Mining, have been driven down almost 16% during the past week, from $A39.06 to $A32.86 yesterday, while New Zealand's largest producer, East Otago-based Oceana Gold, has seen its share price hammered more than 22%, from $3.62 to close at $2.60 on Monday. It retraced some of that loss yesterday.
Shares in New Zealand's largest gold explorer, Glass Earth Gold, have declined 11%, from 70c to 62c yesterday, during the past week.
Historically a safe haven investment in times of turmoil, and as a hedge against inflation, gold has surprisingly been shunned following last week's sharemarket bloodbath as jittery investors fled instead to US Treasury bonds.
Craigs Investment Partners broker Peter McIntyre said because of pessimistic global economic data in recent weeks, there was little sign of inflation in most countries, except for China, and gold was being bypassed.
Investors believed gold was getting too high around the $US1850 to $US1900 mark and were selling out, and it was likely several euro zone countries were similarly selling their gold reserves to boost cash.
"Gold is an asset class which has done well and there will be investors wanting to sell and take a profit from that," Mr McIntyre said.
Mr McIntyre said that in the medium term gold might fall as low as $US1200 an ounce, before there is a consolidation and bottoming out to the decline.
The majority of metals had also been hit in recent weeks.
Silver and copper were well down on earlier prices, because of the weak manufacturing data out of China, as was the price of oil.
