Gold continues biggest decline since 1980

The biggest decline in gold since 1980 (and not many readers may personally recall that fateful year) unfolded in recent hours and the rout extended into the morning hours on Thursday as the yellow metal fell yet another nearly $50 to touch the $1,702 mark overseas. On Wednesday, spot gold fell by another $77.90 per ounce to finish the stormy day at $1,751.30 the ounce. Silver lost $2.11 to end at $39.69. Spot gold dealings opened with pared losses in New York this morning as some of the selling let up momentarily.

Quotes indicated bullion on the bid-side at $1,727.00 the ounce but the market was far from exhibiting signs that the anxiety that has developed since Tuesday has even remotely dissipated. The $1,650 to $1,680 area still presents itself as a target for the bears to try to test but some corrective bounce at this juncture would be as unsurprising as the fact that Apple will continue to exist even after the untimely departure of it cherished CEO.

Silver was off by 31 cents at the opening bell and it was quoted at $39.38 the ounce. The $36.96 level is still apparently the one to breach for the white metal to possibly commence an even more substantial decline than what has been experienced this week. Silver had “refused” to join gold’s rally up until almost the very last minute, and then, it too, attracted a sizeable crowd of latecomers who saw another chance for $50 (or more) to be achieved.

Platinum and palladium both opened unchanged (at $1,799 and at $745) this morning and the recent selling damage ($60 in platinum yesterday but only $13 in palladium) was less severe in this complex, albeit platinum is now trading some $100 under the recent peak it achieved. Palladium still appears as the most ‘stable’ one in this stable; its losses (and by some opinions) its potential downside risk are both on the small side.

Japanese investors meanwhile have been stepping up their purchases of physical but mostly ETF-based platinum since the noble metal has come to near-parity with the yellow one. Investment in platinum by Japanese buyers has doubled since July. Meanwhile, the same Japanese investor has been a consistent seller of gold into market strength in recent months (and even years)…

Spokesmen from Mitsubishi UFJ Trust noted that “While platinum prices are prone to downside risks as they are tied to industrial demand, the metal is more precious in nature than gold and its value is more stable. The fact our ETFs are growing may indicate more Japanese investors are shifting away from physical investment in precious metals." Reuters reports that the spread on the Tokyo Commodity Exchange (TOCOM) between gold and platinum, which is usually priced higher than gold (historically, an average of $200), narrowed this month and fell into negative territory for one day in early August.

While $215 of a cave-in in the yellow is surely quite painful to the multitudes seen still piling into bullion holdings in the initial hours of this trading week, the 12%+ correction is not yet eliciting any bullish towels being thrown into the market’s dirty laundry hamper. To the contrary, various forms of reality denial have been on display, complete with increasing decibel levels as to why gold must and will attain not just mid-four-digit, but also five-figure values…later. Not everyone agrees with that take, however, hefty recent gains notwithstanding.

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