PERTH (miningweekly.com) − Sydney-based Resource Capital Research (RCR) said it might be “a few years” before the recent gold records were surpassed, if the current market rout was a prelude to the next leg down in the global financial crisis.
In one of the worst selloffs since the 2008 financial crisis, gold fell sharply in recent days to below $1 600/oz, from an all-time high of $1 920/oz in early September.
In 2008, the gold price pulled back $288/oz, falling from $1 000/oz before the global financial crisis to a low of $712/oz, and did not return to $1 000/oz until September 2009.
From these lows, bullion prices subsequently rallied to between $1 200/oz and $1 900/oz.
“The safe-haven buying of gold is fear-generated, though this is irrelevant when investors are forced into liquidity-related selling. The recent bull market in gold has been fuelled by the fear associated primarily with massive deficit-driven stimulus spending in the US, and perhaps the biggest fear factor, festering eurozone sovereign debt concerns and the perceived risk to the stability of global financial markets,” RCR said.
It added that these same factors were now pushing investors into liquidity-related selling.
But RCR believes that the long-term outlook for the gold price remains positive, as it would be driven by its relative safe-haven status and longer-term momentum of portfolio diversification away from the US currency.
Meanwhile, the research firm noted that gold equities have generally outperformed broader world markets over the past ten years, though underperformed when compared with the US dollar gold price.
The best performing index has been South Africa, which was up by 22% in the last year and 35% in the last three months.
The Australian gold equities index was up by 1% in the past three months, which compared with a 15% rise in the US dollar gold price, and a 15% fall in the MSCI indices in the same period.