Gold slides 1 percent to five-year low as investors pull back

Wed Jul 22, 2015 2:58pm EDT
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By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold fell more than 1 percent to a five-year low on Wednesday as a bounce in the dollar fueled downside momentum, with investors continuing to pull away from the metal after its dramatic slide earlier this week.

A looming increase in U.S. interest rates, the first in nearly a decade, has diminished gold's appeal to investors, encouraging more sellers in the market after Monday's 3 percent rout, the biggest one-day drop since September 2013.

Holdings in the world's biggest gold-backed exchange-traded fund, SPDR Gold Shares (GLD: Quote), fell for a fourth day on Tuesday by another 4.8 tonnes, the least since 2008. Its reserves have nearly halved from their 2012 peak.

Spot gold XAU= was down 0.8 percent at $1,092.40 an ounce at 2:41 p.m. EDT, after touching a five-year low at $1,086.90. U.S. gold futures GCv1 for August delivery settled down $12 an ounce at $1,091.50.

Gold's decline on Wednesday picked up momentum after the dollar .DXY moved into positive territory against a basket of currencies.

"We have a lot of pockets of weakness currently in the gold market, and that is what is feeding the bearish sentiment we see," Julius Baer analyst Carsten Menke said.

"The money managers are net short and that is relatively rare."

On Monday, a large selloff came on the back of huge volumes traded on the Shanghai Gold Exchange after investors dumped more than $500 million of bullion in New York in four seconds during early Asian trading hours.   Continued...

One-kg 24K gold bars are displayed at the Chinese Gold and Silver Exchange Society, Hong Kong's major gold and silver exchange, during the first trading day after the Chinese New Year holidays, in Hong Kong February 14, 2013.  REUTERS/Bobby Yip