Gold Tumbles 4 Percent to 5-Year Low, Platinum Also Knocked

Gold fell 2.3% from its opening price Monday as positive USA economic data firms expectations the Federal Reserve will raise short-term interest rates later this year.


What some traders described as a “mini flash crash” in early Monday trading in Asia drove the price of gold to its lowest level in five years, falling below $1,100 dollars an ounce.

In 2009 when the People’s Bank of China last revealed details of its hoard, Hou Huimin, who was deputy general secretary of the China Gold Association – an industry body that works closely with the government – predicted the central bank would build its bullion reserves to as much as 5,000 tonnes.

U.S. gold for August delivery was down 1.5 percent at $1,114.50 an ounce, after hitting a session low of $1,080. Negative news in the gold market include, a resolution of the Greek credit crisis, reduced concern of the Chinese economy, expected higher interest rates and a stronger USA dollar, he said.

It was a sudden, massive drop for gold and platinum prices which had breached critical support levels since Friday as the dollar strengthened on growing expectations that the Federal Reserve will hike interest rates this year.

In New York, gold futures fell for an eighth straight day on Monday, the longest rout since 2009. Australian producers saw the value of their shares drop sharply.

Evolution mining was down over 13% in early trade, while Regis Resources, Northern Star Resourcs and Newcrest Mining were all lower by over 8%.

In Hong Kong, brokerage Haitong Securities Co. said its first-half net profit and operating income more than tripled, thanks to a bull market in the January to June period. Moreover, lower than expected gold demand from China had sent investors for the exits.

“[The] only one word that can be described to assess the moves in precious metals today and that word is ‘brutal!'”, MKS Alex Thorndike said in a note. Palladium dipped to its lowest price since October, 2012.

In commodity markets, gold prices have been weighed by a combination of a strong USA dollar and an absence of inflationary pressures across the globe.

A break of the May trough around US$1.0818/19 would likely embolden bears to head for the April lows at US$1.0521.

“The Fed’s decision to restock the rate toolkit has got the gold market very nervous”, George Zivic, a New York-based portfolio manager at OppenheimerFunds Inc., which oversees $235 billion, said by phone.


Holdings in gold-backed exchange-traded products have shrunk as USA equities rallied and the dollar climbed.

Investors generally buy gold as a safe haven during times of uncertainty