Unlucky 2013 Took Away Gold’s Sheen



Market Realist –2013 was a real down year for gold

Gold’s yearly performance dipped for the first time in ten years on April 10, 2013. Consequently, on the same day, the Dow, the S&P 500, and the NASDAQ rose 0.9%, 1.2%, and 1.8%, respectively. The precious metal had been outperforming the S&P 500 since the 2008–2009 meltdown.

The metal lost 2% on April 12, 2013, to close at $1,535 over the news of a possible gold sell-off worth 400 million euros by Cyprus. Gold prices then dropped 9.3% on April 15 due to China’s slow growth rate. China’s slowdown signaled a dip in the demand for commodities from the second-largest economy in the world and the biggest buyer of gold.

Gold prices slumped below the $1,500 mark when the markets closed on April 15. The average gold price dropped to the $1,400 level. The PPI of gold plummeted by 15% in 2013.

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Investors started funneling their money from gold and started chasing the equity markets as the volatility of the markets eased. Investors reportedly pulled out around $10 billion from the SPDR Gold ETF (GLD), which was worth $55 billion. The S&P 500 ended the year with a YTD growth of 26% while gold prices plummeted 29% YTD for the same year.

That is how the gold rally ended after reaching a record high that topped $1,900 in 2011. However, as soon as the markets recovered from the recession, investors ditched their “safer haven” for the highly ecstatic equity markets.

Further, the impending Fed rate hike and the strong dollar acted as a damper for gold prices. After all, gold does not involve any income and comes with a cost of storage. These two facets of gold weigh it down compared to the other income-earning forms of investments.

The SPDR Gold Trust ETF (GLD) and the Market Vectors Gold Miners ETF (GDX) shed 27% and 52%, respectively, in 2013. The RBS Gold Trendpilot ETN (TBAR), unlike the rest, lost only 4.8%.


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