|WHY WALL STREET SUDDENLY HATES GOLD|
Aruba, April 17, 2013 - A boring story that no longer pays – that’s what Wall Street thinks of gold right now. It’s what money managers also think of the financial crisis too. Because whatever gold meant to Wall Street before 2008, it has since come to stand for crisis insurance. And who needs insurance when the stock market is making new all-time highs?
Peaking at $1920 per ounce in summer 2011, when the US debt downgrade crashed into the Eurozone crisis and English riots, gold last week sank through $1500 per ounce. It has already extended that drop today, falling at one point beneath a 30-month low of $1400. Gold’s less precious cousin silver has dropped more dramatically still, losing over 11% during Asian and London trade so far on Monday alone.
The immediate cause of this plunge? Investment bank Goldman Sachs last week advised clients not only to sell gold, but also to sell it “short”– betting that the price would drop further. That looks a very smart call, but Goldmans were in fact behind the curve. Because by the end of February, money managers trading Comex gold futures had already built up as a group their biggest short gold position since 1999.