Gold Rout Spurs Search for Answers as Prices Sink to 5-Year Low

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The rout in gold isn’t showing any signs of slowing down.

In about 15 minutes during Asian trading hours on Monday, prices fell the most in two years, sliding below levels watched by investors who use chart patterns to trade. While bullion pared losses, it is still at a five-year low and headed for a sixth session of declines. Gold for immediate delivery retreated 2.3 percent to $1,108.28 an ounce at 1:43 p.m. in New York.

China, the world’s largest consumer of the metal, reported reserves on Friday that were smaller than expected. Prices fell below the 2014 low, making gold vulnerable to more losses, Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam, said by e-mail on Monday.

“This sudden drop during Asian trading seemed to have been triggered by some stop-loss selloffs that have nothing to do with fundamentals,” Wallace Ng, a trader at Gemsha Metals Co., said from Shanghai.

Prices fell as much as 4.2 percent, the biggest intraday decline in two years. Gold futures for August delivery fell 2.2 percent to close at $1,106.80 an ounce on the Cmoex in New York, an eighth straight loss and longest slump since March 2009.

“A key level of technical support broke during a period of thin liquidity, triggering stops when it did,” Boele said.

Gold has fallen out of favor as Federal Reserve Chair Janet Yellen prepares to raise rates this year. Money managers are holding the smallest net-bullish bet on gold since the U.S. government data begins in 2006.

China Gold

In the first update since 2009, the People’s Bank of China said on Friday that it owns about 1,658 metric tons, implying purchases of 100 tons a year. That’s less than brokers at GoldCore Ltd. and Sharps Pixley Ltd. expected.

“The market is in one of its bear phases, where any news is bearish news,” said David Baker, Sydney-based managing partner at Baker Steel Capital Managers LLP. He predicted that gold may drop to as low as $1,050 an ounce.

Investors are also dumping silver, platinum and palladium. Combined net-long wagers across the metals are the lowest ever. About $2.7 billion was erased from the value of exchange-traded products tracking the commodities last week, the most since March.

Mining stocks also retreated. The 15-member Bloomberg Intelligence Global Senior Gold Valuation Peers Index, which includes Barrick Gold Corp. and AngloGold Ashanti Ltd., dropped as much as 8.7 percent to 17.05, the lowest since the gauge began in 2005.

Silver for immediate delivery slid 0.5 percent to $14.8083 an ounce.

((An earlier version of this story was corrected to insert a decimal point into the platinum price.))

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