Gold slumps to two-year low below $1,400 per ounce

Mon Apr 15, 2013 7:18am EDT
 
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By Clara Denina

LONDON (Reuters) - Gold dropped as much as 6.3 percent on Monday to below $1,400 per ounce for the first time since March 2011 as the market's downward momentum gained speed after more than four months of investor selling.

Investors ditched gold along with other commodities from oil to copper after a less-than-forecast growth in China's gross domestic product in the first quarter stoked doubts about the health of the global economy.

This added to last week's fears of central bank sales from Europe, prompted by a proposed sale of Cyprus bullion holdings, and concerns about a reduction in monetary stimulus. Adding to selling pressure, exchange-traded funds hit their lowest in more than a year on Friday.

Spot gold dropped as low as $1,384.69 an ounce and was at $1,409.26 by 1048 GMT, still down 4.7 percent.

U.S. futures for June delivery extended losses to fall more than 5 percent as Tokyo gold futures tumbled around 8 percent, marking Japanese futures biggest daily fall since September 2011.

"We are entering a phase of additional long liquidation by ETF investors and short-selling from hedge funds, which will continue in the foreseeable future," Saxo Bank senior manager Ole Hansen said.

"Purely looking at the charts, support would now be at $1,300, which would equate the 50 percent retracement from the rally from the Lehman crack in 2008 to the September 2011 record high."

Other precious metals were also hit by heavy selling, with silver falling to its lowest since October 2010, platinum at its weakest since August last year, and palladium hitting a three-month low.   Continued...

 
Gold bars are seen in this picture illustration taken at the Istanbul Gold Refinery in Istanbul March 12, 2013. REUTERS/Murad Sezer