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Why the Price of Gold is Down

Written By Luke Burgess

Posted March 20, 2008

Gold is getting murdered. It’s down over $100 from the record high set on Monday of $1033.90 an ounce. Gold for April delivery was last seen trading at $912.30 an ounce.


Prices are choking down this week because of strengthening in the US dollar following the US Federal Reserve key interest rate cut on Tuesday. The value hike in the greenback had those playing the recent upward momentum in gold, including the hedge funds, selling the sunshine metal to buy back into equities.

This pullback has had a significant downward effect on mineral stocks across the board. For the week, losses from major mineral companies include:

  • GoldCorp (TSX: G, NYSE: GG), down 13.8%
  • Newmont Mining (NYSE: NEM), down 12.6%
  • Barrick Gold (NYSE: ABX, TSX: ABX), down 20.9%
Mid-sized mineral stocks followed suit. Significant losses so far seen in mid-sized metal firm this week include:
  • Anico Eagle Mines (NYSE: AEM, TSX: AEM), down 16.5%
  • Harmony Gold Mining (NYSE: HMY), down 13.4%
  • Kinross Gold (TSX; K), down 12.4%
  • Gold Fields (NYSE: GFI), down 8.3%
  • Yamana Gold (TSX:YRI), down 14.7%
The Market Vectors-Gold Miners ETF (AMEX: GDX), an exchange-traded fund designed to track the performance of the Amex Gold Miners Index (AMEX: GDM), has also seen significant losses this week. As of the close of market today, the Market Vectors-Gold Miners ETF was down 14.6% for the week.

This benchmark holds over 40 mining stocks, with majors like Newmont (NYSE: NEM), Barrick Gold (NYSE: ABX) and Goldcorp (NYSE: GG) and juniors like Crystallex (AMEX: KRY), Golden Star (AMEX:GSS), and Entrée Gold (AMEX:EGI).

Despite the ugly losses we’ve seen this week we’ve seen in our favorite metal, the macroeconomic fundamentals of higher gold and precious metal prices still exist. The US dollar will continue its downward spiral as energy prices rise and credit markets remain weak. Meanwhile most precious metal markets are expected to have supply deficits because of mining problems in South Africa and increased investor demand.

So even if we see more losses in gold in the coming days, rest assured that a tiny uptick in the dollar isn’t going to have much of a long-term downside influence on the current gold bull market.

Until next time,

Luke Burgess