Gold plunged to a 34-month low, set for a record quarterly drop, as improving U.S. economic data strengthened the case for the Federal Reserve to reduce stimulus. Silver futures fell to the lowest since August 2010.
Gold has dropped 23% this quarter, heading for its biggest loss since at least 1920 in London. Fed Chairman Ben S. Bernanke said last week the central bank may slow its asset-purchase program this year if the economy continues to improve. U.S. durable-goods orders rose more than expected, home sales advanced to the highest in almost five years and consumer confidence climbed, data showed yesterday.
About $60 billion was wiped from the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value and speculation grew that the Fed will taper debt-buying that helped gold cap a 12-year bull run last year. A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver, platinum and palladium, which are used more in industry than gold.
“The selloff is a continuation of the response to concerns over the Fed tapering stimulus,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “We’ll need to see evidence of more physical buying and demand from central banks before it really turns around. No one wants to catch a falling knife.”
Gold for immediate delivery fell as much as 4.4% to $1,222 an ounce, the lowest since Aug. 24, 2010, and was at $1,224 at 7:48 p.m. in London. Bullion futures for August delivery dropped 3.6% to settle at $1,229.80 on the Comex in New York.
Silver futures for September delivery tumbled 4.8% to $18.613 an ounce in New York after touching $18.385, the lowest since Aug. 25, 2010. Trading was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011. Analysts from Morgan Stanley to Credit Suisse Group AG and Goldman Sachs Group Inc. trimmed price forecasts this week. ABN Amro Group NV today said in a report that it sees the metal at $900 by the end of next year.