Gold plunged to a 34-month low, set for a record quarterly drop, as improving U.S. economic data strengthened the case for the Federal Reserve to reduce stimulus. Silver futures fell to the lowest since August 2010.
Gold has dropped 23 percent this quarter, heading for its biggest loss since at least 1920 in London. Fed Chairman Ben S. Bernanke said last week the central bank may slow its asset-purchase program this year if the economy continues to improve. U.S. durable-goods orders rose more than expected, home sales advanced to the highest in almost five years and consumer confidence climbed, data showed yesterday.
About $60 billion was wiped from the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value and speculation grew that the Fed will taper debt-buying that helped gold cap a 12-year bull run last year. A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver, platinum and palladium, which are used more in industry than gold.
“The selloff is a continuation of the response to concerns over the Fed tapering stimulus,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “We’ll need to see evidence of more physical buying and demand from central banks before it really turns around. No one wants to catch a falling knife.”
Gold for immediate delivery fell as much as 4.4 percent to $1,222 an ounce, the lowest since Aug. 24, 2010, and was at $1,224 at 7:48 p.m. in London. Bullion futures for August delivery dropped 3.6 percent to settle at $1,229.80 on the Comex in New York.
Silver futures for September delivery tumbled 4.8 percent to $18.613 an ounce in New York after touching $18.385, the lowest since Aug. 25, 2010. Trading was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011. Analysts from Morgan Stanley to Credit Suisse Group AG and Goldman Sachs Group Inc. trimmed price forecasts this week. ABN Amro Group NV today said in a report that it sees the metal at $900 by the end of next year.
“The fact that it has fallen below last week’s low is likely to have prompted follow-up selling for technical reasons,” analysts at Commerzbank AG wrote today in a report. Better-than-expected U.S. data “makes it all the more likely that the Federal Reserve will prematurely scale back its bond-purchasing program.”
Gold’s 14-day relative strength index was at 22, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.
An ounce of gold bought as many as 66.5 ounces of silver in London today, the most since August 2010. Silver futures are down 34 percent this quarter, set for the biggest drop since the start of 1980. It’s the worst performer this year on the Standard & Poor GSCI Spot Index of 24 commodities. The index is down 5.5 percent this year, partly on concern that growth may slow in China.
Assets in the SPDR Gold Trust, the largest bullion-backed ETP, fell 16.2 metric tons to 969.5 tons yesterday, the lowest since February 2009, according to its website. The number of hedge funds investing in bullion dropped to the lowest since 2010, according to EurekaHedge Pte Ltd., a Singapore-based fund-research company.
The dollar rose for the sixth straight session against a basket of major currencies, heading for the longest rally in 13 months.
“The raft of figures that came out of the U.S. all pointed to a stronger growth pattern, which pushed the dollar higher,” David Lennox, an analyst at Fat Prophets, said from Sydney. “That’s two nails in the coffin for gold: a stronger U.S. dollar and expectations that quantitative easing will be scaled back.”
On the New York Mercantile Exchange, platinum futures for October delivery fell 3.4 percent to $1,307.40 an ounce, after earlier dropping to $1,305.60, the lowest for a most-active contract since October 2009.
Trading was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Palladium futures for September delivery retreated 5.3 percent to $633.25 an ounce, the biggest slump since April 15.