London - As economies slow, Japan's stock market sinks to a 16-year low and its US counterpart tumbles, the price of gold is sliding towards a two-decade low. A drop of just $8 more and gold is there.
Blame is abundant. Gold-mining companies are selling to protect profits against a further drop. Central banks are dumping gold reserves to buy government bonds. Speculators are selling in hopes of profiting from the decline.
With stock markets dropping, backers of gold will meet this week in Rome to discuss capitalising on this chance to revive the metal from its slump.
While gold rallied in the second half of February, the metal has only fallen back since then, even as the outlook for stocks worsened.
Greg Barns, the chief executive of the producer-funded Australian Gold Council, said: "We are on the brink. We haven't seen the gold rally sustained, even though financial markets plummeted."
The Standard & Poor's index this year is down 13 percent, while the UK's FTSE has shed 11 percent.
The price of gold, often seen as a haven in bad times, in London so far this year is down $13 at $259,25 an ounce. The 20-year low is $251,95.
Forecasts for economic turmoil helped gold demand in 1999, amid warnings that the turn of the millennium would stall computer systems and cause mayhem. The doomsayers were wrong, and investment demand for gold last year plunged 21 percent.
That threat past, gold officials predict that a slowing economy and burgeoning current account deficit will cause a decline in the US dollar, making the metal cheaper for buyers elsewhere and spurring demand.
Markets so far have resisted the argument.
Ross Norman, an analyst at TheBullionDesk.com, a precious metals research firm, said: "The sharp decline in the global stock markets failed to ignite investors' enthusiasm for gold."
Sinking gold prices have spurred a vicious circle, as central banks sell bullion from their reserves to buy higher-returning assets, such as government bonds.
National banks will sell 565 tons of gold this year, up from 549 tons last year, Barclays Capital estimates.
Only steady demand for gold jewellery, mostly from Asia, had kept bullion prices from collapsing, traders said. Jewellers buy four-fifths of the world's gold.
Now, the consumer market is threatened. India, the top buyer of gold, may purchase less this year after the January earthquake in the Gujarat state. Gold jewellery sales fell last year in Europe, which traders see as setting fashion trends for the rest of the world.
Gold merchants hoped that a 20 percent devaluation of Turkey's currency during the past month would spur gold sales there. So far it had not, analysts said.
Gold rallied 4,5 percent from March 5 to March 9 on speculation that some central banks were cutting back their bullion lending. The gains evaporated the next week.
Rhona O'Connell, an analyst at Canaccord Capital, said: "Most elements are conspiring against the yellow metal."
Some gold producers say changes to marketing and trading systems may lift prices. AngloGold, the world's largest gold producer, will likely use the Rome conference to repeat its call for the industry to unite in advertising and marketing as diamond sellers do. Most miners have ignored Anglo's plea.
The Australian Gold Council has proposed introducing gold warrants, enabling investors to buy gold without taking physical possession of it.
It says these instruments, and Internet trading, could attract new participants.
But the industry's main hope still remained in a drop in the dollar, analysts said.
"Good currencies don't last forever," Barns said.
"There will come a time when the US currency runs out of its good luck, and then we'll probably see some recourse to gold by investors." - Bloomberg