The gold price crashed through the $1,100 per ounce mark during Asian hours on Monday, amid a cross-complex washout, with the metal now trading at its lowest level in five years.
Spot gold was last seen at $1,115.00/1,115.80 per ounce, down $18.90 on the previous session, having touched session lows of $1,085 per ounce during Asian trade. The metal is now trading at its lowest level since March 2010.
Within a matter of seconds, the gold price shed nearly five percent of its value around 2:30am BST, as scores of Chinese traders offloaded more than five tonnes of metal – pushing the price from around $1,130 all the way down to $1,085.
“[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. “The $50 move took everyone by surprise with no real catalyst to point a finger at,” he added.
A number of factors are being cited as potential catalysts, most notably, China’s disclosure of its official gold reserves last week significantly underwhelming the bulls who had long been suggesting China had accumulated some 3000 tonnes.
The People’s Bank of China (PBoC) announced its first increase to official gold reserves in six years on Friday, overtaking Russia as the fifth largest holder of the metal at around 1,658 tonnes. According to the World Gold Council’s figures, this is an increase of 604 tonnes since the last time the central bank updated its figures in 2009.
The decreased likelihood of a Greek exit from the eurozone is also likely to be playing on the metal’s credentials as a safe-haven asset, following news that the country has come to a tentative agreement with creditors on a third bailout.
Furthermore, hawkish comments from Federal Reserve Chair Janet Yellen last week, signalling that the normalisation of monetary policy will begin at some stage this year, providing the economy grows as is expected, has underpinned advances in the dollar.
“Today’s price action does not seem to be driven by fundamentals. The nature, size and timing of the heavy selling suggests a market participant was taking advantage of low liquidity or some sort of forced selling had taken place,” ANZ said in a note. “We will only know in hindsight, but the damage to gold has been done. The break of the critical $1,130 per ounce support level now makes the technical picture look very weak,” it added.
The dollar was last at 1.0853 against the euro, while all major European indices are in positive territory, following marginal gains in Asia.
The market remains significantly short – the latest CFTC data for the week ending July 14 showed that the net fund length dropped to 47.8k lots while gross shorts remain near record highs. Outflows also continued in ETF markets followed by FastMarkets. ETF holdings are now at their lowest level this year as of July 17 at 1,576 tonnes, down 11.52.
Other metals are also suffering; silver followed gold lower and hit its lowest since August 2009 at $14.55 per ounce. It has since recovered all of its losses and was last seen at $14.81/14.86, down just one cent. Platinum remains below $1,000 per ounce, a level it hasn’t seen in six years – it was last down $6 at $983/988. Palladium is a similar story, the metal dropped below $600 per ounce for the first time in three years on Monday at $596 – it was last down $2 at $609/614.
(Editing by Martin Hayes)
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