Nervous traders push gold down further
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Your support makes all the difference.GOLD prices sank again yesterday in nervous trading following Thursday's tumultuous fall of nearly dollars 23 an ounce, the steepest one-day drop since the Gulf war.
In London, gold fell dollars 13.75 to close at dollars 374.50, a loss of dollars 27 in two days and a dollars 35 loss for the week.
The metal was fixed at a five-week low of dollars 381.90 yesterday morning, following the rout in New York gold futures markets overnight, which dragged prices to a low of dollars 372 before closing at dollars 377.25/dollars 378.25.
It recovered slightly, but renewed US fund selling in New York futures markets pushed it lower throughout the London afternoon. Gold was fixed at dollars 379.40 in the afternoon and closed at dollars 374.50, compared with Thursday's close of dollars 388.25.
The slide was all the more dramatic because it occurred only days after the price breached dollars 400, the highest since the Gulf war in January 1991, amid investor euphoria.
Gold broke through dollars 400 on 30 July as the exchange rate mechanism teetered on the brink of collapse. Investors bought it, anticipating lower European interest rates, which reduce the opportunity cost of investing in a precious metal instead of a building society, said Lawrence Eagles, commodities analyst with GNI Research. The price hit dollars 409 on Monday, 25 per cent above the seven-year low of dollars 326 in March.
Heavy selling by US investment funds caused Thursday's tailspin, triggering further sell signals, which caused prices to spiral lower.
Rumours of bullion sales by China's central bank and a report by the World Gold Council showing a levelling of gold demand accelerated the decline.
Gold bugs do not believe the rally is over yet. A dealer with NM Rothschild & Sons in London said: 'On Monday everyone will take a new look at gold, and reappraise the market.' Prices could pause for a time before heading higher again, she said. 'It took six months for prices to come up, and they came down in two hours yesterday.'
Others believe that the gold market was overheating.
Philip Klapwijk, analyst with Gold Fields Mineral Services, said: 'The funds were pushing gold ahead very quickly and the price was getting out of touch with demand conditions for the metal.'
Money, page 19
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