Gold drops to 34-month low as precious metals slide on Fed view

Technical Selling

“The fact that it has fallen below last week’s low is likely to have prompted follow-up selling for technical reasons,” analysts at Commerzbank AG wrote today in a report. Better-than-expected U.S. data “makes it all the more likely that the Federal Reserve will prematurely scale back its bond- purchasing program.”

Gold’s 14-day relative strength index was at 22, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.

An ounce of gold bought as many as 66.5 ounces of silver in London today, the most since August 2010. Silver futures are down 34% this quarter, set for the biggest drop since the start of 1980. It’s the worst performer this year on the Standard & Poor GSCI Spot Index of 24 commodities. The index is down 5.5% this year, partly on concern that growth may slow in China.

ETP Holdings

Assets in the SPDR Gold Trust, the largest bullion-backed ETP, fell 16.2 metric tons to 969.5 tons yesterday, the lowest since February 2009, according to its website. The number of hedge funds investing in bullion dropped to the lowest since 2010, according to EurekaHedge Pte Ltd., a Singapore-based fund- research company.

The dollar rose for the sixth straight session against a basket of major currencies, heading for the longest rally in 13 months.

“The raft of figures that came out of the U.S. all pointed to a stronger growth pattern, which pushed the dollar higher,” David Lennox, an analyst at Fat Prophets, said from Sydney. “That’s two nails in the coffin for gold: a stronger U.S. dollar and expectations that quantitative easing will be scaled back.”

On the New York Mercantile Exchange, platinum futures for October delivery fell 3.4% to $1,307.40 an ounce, after earlier dropping to $1,305.60, the lowest for a most-active contract since October 2009.

Trading was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.

Palladium futures for September delivery retreated 5.3% to $633.25 an ounce, the biggest slump since April 15.

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