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Gold price plunges, years of 'gentle bear market' seen Add to ...

These are stories Report on Business is following Friday, April 12, 2013.

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Gold plunges
It was just last week that Société Générale forecast a plunge in the price of gold and the beginning of a "gentle bear market" that would run for years.

Société Générale believes today that it won't be a straight run down, but the call may well turn out to have been prescient, given the plunge in the price below $1,500 (U.S.) an ounce at one point.

This week, Goldman Sachs also forecast a hefty drop in bullion.

As The Globe and Mail's David Berman writes, the price of gold is now more than 20 per cent below its peak of almost $1,900 in the summer of 2011, meaning a bear market.

Société Générale expects gold to continue to fall, and end the year down 15 per cent, closing out 2013 at $1,375 an ounce, followed by what it called a "gentle bear market." The call by Goldman Sachs is for an average $1,545 this year and $1,350 next.

"The gold price is, in our view, in bubble territory," Sébastien Galy of Société Générale said last week.

"Investors have pushed the gold price sharply higher over the past 10 years with the past five-year rally driven by fears that aggressive central bank [quantitative easing] would lead to very high inflation," he said.

That inflation, of course, has failed to materialize. Indeed, fresh numbers in the United States today showed producer prices falling in March.

Société Générale's global chief of commodities research, Michael Haigh, said today it won't be a "smooth run" down for gold at this point, but that doesn't mean the trajectory will change.

"It will pop up occasionally but the downtrend should continue," he said.

Adding some fuel was a leaked draft document of the bailout requirements for Cyprus, which raised the possibility of the country selling €400-million in gold reserves.

RIM seeks probe
Research In Motion Ltd. is going after a U.S. investment firm, demanding a probe after what it calls a “false and misleading” report on the number of new BlackBerry Z10 smartphones being returned.

As The Globe and Mail's Steve Ladurantaye reports, RIM said today it will ask both the Securities and Exchange Commission and the Ontario Securities Commission to investigate.

“Sales of the BlackBerry Z10 are meeting expectations and the data we have collected from our retail and carrier partners demonstrates that customers are satisfied with their devices,” chief executive officer Thorsten Heins said in a statement.

“Return rate statistics show that we are at or below our forecasts and right in line with the industry,” he added.

RIM shares tumbled yesterday as an investment firm suggested many returns of the make-or-break new smartphone.

Detwiler Fenton & Co., the target of the RIM statement, had said that “in several cases, returns are now exceeding sales, a phenomenon we have never seen before.”

Both BlackBerry and Verizon in the United States refuted this yesterday, adding today that the firm would not make its report available.

“These materially false and misleading comments about device return rates in the United States harm BlackBerry and our shareholders, and we call upon the appropriate authorities in Canada and the United States to conduct an immediate investigation,” said RIM’s chief legal officer, Steve Zipperstein.

“Everyone is entitled to their opinion about the merits of the many competing products in the smartphone industry, but when false statements of material fact are deliberately purveyed for the purpose of influencing the markets a red line has been crossed.”

Anne Buckley, the research firm’s general counsel and chief compliance officer, responded in a statement that Detwiler Fenton is confident in its methodology and welcomes any probe.

“Detwiler Fenton is not the only research provider publishing similar reports regarding customer reactions, sales, and returns of the BlackBerry Z10,” she said.

“It should also be noted that neither the research analyst nor any officer or director of Detwiler Fenton has any financial interest in BBRY,” she added, referring to the company by its U.S. stock symbol.

JPMorgan sees record profit
JPMorgan Chase & Co. set an optimistic tone for quarterly reporting season among America’s major banks, with

a 33-per-cent jump in profit that topped the expectations of analysts.

The U.S. bank earned a record $6.5-billion (U.S.) or $1.59 a share in the first quarter, well up from $4.9-billion or $1.19 a year earlier and boosted by investment banking.

JPMorgan also plans to boost its dividend in the second quarter to 38 cents from 30 cents.

“We are seeing positive signs that the economy is healthy and getting stronger,” said chief executive officer Jamie Dimon.

“Housing prices continued to improve and new home purchases are also starting to come back. We also saw strong performance in our credit card portfolio, with net charge-offs remaining near historic lows, another sign that consumers are healthier and more confident,” he said in a statement, though added that “loan growth across the industry has been softer this quarter.”

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