While it has been a dreadful few months for gold bugs, it has been worse for investors in gold mining companies. Major gold miners have tended to perform worse than exchange traded funds not only during the sell-off of the precious metal since April, but also since the record high reached in September 2011.
Newcrest Mining Ltd, Australia's biggest gold miner, was the latest producer to disappoint investors, issuing a profit warning and announcing plans to slash up to $6 billion in asset values, reduce costs and cut planned expansions. The stock has shed almost 11 per cent of its value since the June 7 statement, adding to losses suffered in recent years.
Business Standard
Given the extreme stress that India's current account is under, it came as a great relief when international gold prices declined sharply over the past several weeks.
Gold imports have been a huge contributor to the widening of the current account deficit. It was believed that lower prices would dampen the enthusiasm of buyers who were lured by the prospect of endless appreciation.
The high import duty on gold, local taxes and restrictions on imports are leading to a rise in smuggling of the commodity into the country.
Last year, 102 tonnes of gold, or 10 per cent of total imports, made its way through unofficial routes, according to Thomson Reuters GFMS, which compiles data for the World Gold Council.
It is estimated this year it could rise to 140 tonnes, an increase of 40 per cent.
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