Last week, Gold, once considered among the safest investments, dropped to its lowest price since August 2010 and is down about 26% since the beginning of 2013. The performance of gold mining stocks is worst with many declining by over 45% since the beginning of the year. It is worth noting that India has historically been a leading purchaser of gold. This year, the country’s Finance Minister P. Chidambaram said their “passion for gold” was causing budgetary problems because it is purchased from sources outside of the country. In March, he said, “I’m hoping that the people of India will heed my appeal and will not demand so much gold”. In June, he said “I would once again appeal to everyone: please resist the temptation to buy gold”.
While debates continue about the merits of gold investing, how gold should be valued, and what drives its prices up or down, it is likely drivers of this year’s decline include reduced purchases from India and other Asian regions, as well a change in investor psychology as the price drop continued. While it is hard to pick a bottom, the recent increased focus on this topic suggests that a bottom may be close at hand.