Gold investors stunned by biggest two-day price drop in 30 years

Most experts failed to see the collapse coming. A Reuters poll in January of 37 banking analysts and consultants forecast another year or two of average record highs for gold, after 12 years of unbroken annual average gains from a spot low of around $250 per ounce.

Source from (Independece.Ie): http://www.independent.ie/business/gold-investors-stunned-by-biggest-twoday-price-drop-in-30-years-29203949.html
Published: April 19, 2013


Even the most fierce gold bulls must be feeling sheepish 
after bullion tumbled its most in 30 years, raising questions about 
gold's value as part of an investor portfolio.

A long list of banks forecast gold would average more than $1,800 per ounce, up from $1,668 in 2012. They included ANZ, BNP Paribas, Bank of America/Merrill Lynch, Deutsche Bank, Commerzbank, Macquarie, Morgan Stanley, Standard Chartered and Goldman Sachs. Only one, National Australia Bank, predictedbelow $1,600.

And even though banks had started back-pedalling on those forecasts, most still favoured the fundamental case for holding gold as an alternative currency and hedge against inflation.

And then came Cyprus.

An assessment of Cypriot financing needs prepared by the European Commission showed on April 10 that the troubled island would need to sell excess gold reserves to raise around 400 million euros to help finance part of its bailout.

On the same day, minutes from the March 19-20 U.S. Federal Reserve meeting showed officials appeared on course to end their extraordinary bond-buying stimulus by year-end, which in turn would relax inflationary pressure.

Gold fell 1.6 percent, but appeared to stabilise the following day before plummeting around 5.2 percent and 8.4 percent on Friday and Monday, respectively, as selling triggered more selling - the biggest two-day move in 30 years.

Having cratered to $1,321/oz on Tuesday, bullion was priced near $1,380 on Wednesday, having started Friday above $1,560.

Investors in gold-backed exchange-traded funds in particular have exited in hordes.

"I don't think anyone thought we'd see the enormous move and volume of selling that we did see. It's done a great deal of damage to investors' confidence," said Sean Corrigan, chief investment strategist at Diapason Commodities Management in Switzerland.