Gold prices plunged more than 9% Monday, to a two-year low, capping two days of turbulent trading that saw the sharpest losses for the precious metal in recent history.
Since Thursday, gold prices have fallen by more than $200 an ounce—the most over two sessions in dollar terms since gold futures began trading in the U.S. in 1974. Gold for April delivery, the front-month contract, settled Monday down $140.40, or 9.4%, at $1,360.60 an ounce on the Comex division of the New York Mercantile Exchange.It's a sea of red," said Ira Epstein, a director at Linn Group futures brokerage. Trading volumes in the futures market hit a record.
Gold prices have been falling steadily since October. The metal has lost its safe-haven luster as the debt crisis in the euro zone has stabilized and as partisan furor in Washington has died down. Meanwhile, other assets, such as stocks, have become more attractive for investors seeking higher yields. And inflation worries sparked by the Federal Reserve's stimulus program have ebbed, disappointing some investors who bought gold as a hedge against broad-based price increases.
On Monday, another traditional leg of support for the gold market—physical demand in Asia—started to look shaky, further spooking investors. Some likely were forced to sell to meet "margin calls," or cash that brokers demand from clients to keep bets open.
"All of a sudden, the price is below $1,500, and you have to put up more money," said Jeffrey Christian, chief executive at metals-consulting firm CPM Group. Faced with such choices, more and more investors are choosing to dump their gold holdings rather than risk riding out the selloff, he said.
"I'm sure there are a lot of margin calls being triggered and positions being blown," said Bob Haberkorn, senior commodities broker with RJO Futu
In percentage terms, Monday's drop was gold's biggest in 30 years.
Monday's selloff began during Asian trading. China registered weaker-than-expected growth, stoking concerns that consumers there and in India—the world's two biggest buyers—may slow their purchases.
In India, the largest gold industry group warned that the country is losing confidence in the metal because of the recent slide.
"The market saw gold going lower, and everyone panicked," said Pradeep Unni, head of research at Richcomm Global Services, a Dubai-based commodity broker. "The most important factor for gold now is Indian and China demand." The slowdown in Indian buying comes at a crucial time, as the peak wedding season is kicking off, traditionally when consumers buy gold ornaments for gifts to brides.
Base-metal prices were also under pressure, with, Comex copper for April delivery falling 6.90 cents, or 2.1%, to $3.2800 a pound. China is the world's largest consumer of base metals such as copper, and any signs that growth in the region is faltering tend to be taken negatively by investors.
"The money is going out of gold. It's going out of commodities, and it's going into the stock market," said Edward Meir, senior commodity analyst with brokerage INTL FCStone. "Funds are not seeing the inflation, they're not getting any returns in bonds, but they are putting money in the stock market."
Elsewhere in precious metals Monday, losses were similarly extreme. Silver, which tends to see more exaggerated moves than gold because of its relatively thin market, closed down $2.9670 a troy ounce, or 11%, at $23.3550 an ounce.
The fall took some by surprise, with Singapore-based traders saying they hadn't been prepared for the heavy losses. While China's growth data is always keenly watched, it seldom causes such large moves in gold and other markets.
"Some seasonal buying is there. due to the wedding season. But the demand is thin," said Haresh Soni, chairman of the All India Gems and Jewelry Trade Federation. "People aren't comfortable entering the market now. They will wait for some more time for the rates to stabilize."
Mohit Khamboj, president of Bombay Bullion, estimates about 1½ tons of gold will be sold daily by long-term investors in Mumbai alone. That is a sudden shift from two months ago, when Indian investors were bullish and buying.
"Gold investments are increasingly looking like a bubble," said Mr. Khamboj.
It is as of right now the middle of the morning FX trading day in London..... the FX capital of the world.......
just in case you are wondering if this is a late night or early morning for me....... I am pretty keen on selling some insurance products....... as the PPACA is impacting 1/6th of our entire economy............toss in some swings in the inflation and deflation and you have a 3 dimension chess board and occassionaly an Apple falls in your lap.
or you are wandering in the park and come upon a tree and it looks like it's growing these currency notes with Benjamin Franklin on them...... and then you look closer and they are 500 EUR currency notes and they are just sitting there waiting to be picked........... but you have to be paying attention to notice that this fabulous money tree has all this low hanging fruit that will be available for 6 weeks.
John |
