NY gold loses most in 15 years

NY gold loses most in 15 years

Gold futures plummeted 7.3 percent on Tuesday, the biggest fall in more than 15 years, closing below $600 an ounce on heavy selling due to a stronger dollar, soft oil price and concerns over interest rate hikes.

Silver dropped 13 percent and fell below $10 an ounce as speculative liquidation pummeled the precious and base metals, and platinum and palladium futures also tumbled.

Stop-loss selling hammered gold after the market retreated below first $600 and then $590, which were recent trend-line support levels, said trading sources. It was the biggest decline for bullion since a 7.4 percent drop on January 17, 1991.

“It was all margin selling and liquidation by the funds,” said George Gero, vice president at RBC Capital Markets Global Futures. “No buyers appeared until the market was $40 down.”

August delivery gold was down $44.50, or 7.3 percent, to end at $566.80 an ounce on the New York Mercantile Exchange’s COMEX division, dealing between $611.70 and $565.50 — its cheapest level since March 24.

Gold accelerated losses after overnight falls in Asia and Europe, after the dollar climbed anew as the core U.S. producer price index for May rose faster than economists had expected.

Investors’ aversion to risk and a desire for liquidity were weighing on many financial markets on Tuesday, analysts said.

“Fund dealer and investors liquidation” intensified after the New York open, said James Moore, analyst with TheBullionDesk.

Gold “needs to stabilize in order to renew investor confidence in the market or else run the risk of free-fall back to the $500 to $480 area,” he said.

COMEX gold rose to $732 in mid-May, its priciest since 1980, before it began its one-month slide. Analysts said investors are reluctant to build positions now amid the extreme price volatility and limited consumer demand for metal.

A higher-than-expected May core producer prices reading underscored worries about inflation and reinforced ideas of a
Federal Reserve interest rate hike at the end of this month.

U.S. May core producer prices, which exclude food and energy, rose 0.3 percent, above economists’ forecasts for a rise of 0.2 percent.

Another government report said retail sales rose 0.1 percent in May from a 0.5 percent rise in April, as expected.

“We believe that investors are showing signs that they are most concerned about over-aggressive central bank rate hikes triggering a growth slowdown,” said UBS analyst John Reade in a daily note.

“Fears of a growth shock has knocked equities, emerging markets and commodities — including gold … With a heavy data and comment calendar out of the U.S. this week, we expect further volatility and likely further near term declines in precious and base metals prices,” Reade said.

Spot gold dropped to $562.00/562.70 an ounce, way down from Monday’s New York close at $605.60/6.30. Tuesday’s afternoon bullion fix in London was at $586.50.

The dollar hit new one-month highs against the euro and yen Tuesday. Gold has a tight inverse relationship with the U.S. currency as investors often use the metal as a dollar alternative.

Oil fell sharply, echoing similar moves across commodities and stocks. The fact that Tropical Storm Alberto, the first of the U.S. hurricane season, was forecast to miss oil and gas infrastructure, also pressured prices.

COMEX July silver fell as low as $9.60 an ounce to post a near three-month low, before it edged to $9.6250, off 13 percent or 144 cents. The day’s high was $11.0850.

Spot silver sank to $9.56/9.66 an ounce, against $11.03/11.13 previously. Silver fixed at $10.47.

At NYMEX, July platinum was down $52.90 or 4.5 percent at $1,118.50 an ounce, after it hit a six-week low at $1,115.50. Spot platinum last traded at $1,116/1,120.

Thinly traded September palladium fell $39.05 or 12.4 percent to close at $272.70 an ounce, near a fresh three-month low of $274.10. Spot palladium fell to $272/277.

(Reuters)

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