Dow Jones Newswires Gold bugs have been flattened in the second quarter, and that's putting it kindly. Gold-oriented mutual funds have suffered their worst performance since the fourth quarter of 1994. Other fund managers aren't hiding their disappointment. Managers worry that the pessimism gripping gold stocks will continue for the rest of year.
Investors seem to have lost faith as well.
Calif. The quarter started on a dismal note when claims of a huge gold discovery by Bre-X Minerals turned out to be a massive hoax. Bre-X shares plummeted, pulling down other small exploration companies. X. Other scandals, such as a Nevada gold discovery by Delgratia Mining that was revealed as a fraud, and a discrepancy between gold value assessments at Golden Rule Resources ' Ghana property, only helped to diminish investors' confidence in exploration companies. The bearish mood was compounded throughout the quarter as European central banks continued to sell gold reserves, trying to meet the deficit requirements for European monetary union. Though the sales didn't represent a large percentage of the total gold reserves, bullion prices have been driven down by fears that the central-bank selling will continue and the banks' commitment to gold will diminish, fund managers say.