Big fund suspected of selling gold after price crashes to 5-year low
Gold prices continued falling Monday, briefly hitting a more than a five-year low in Asian trade, after China indicated its gold reserves were at half the level expected.
The yellow metal has lifted up from its worst levels of the day, but still was firmly in the red.
August gold futures GCQ5, -1.55% were last down $16.60, or 1.5%, to $1,115.30 an ounce, after briefly trading around $1,080 an ounce — a level last seen in early 2010.
“This kind of sharp drop during early Asian hours is a strong indication that a big fund is selling their holdings of gold,” said Gnanasekar Thiagarajan, director of Commtrendz Risk Management.
The move follows a sharp drop in gold prices in U.S. trading on Friday, when gold settled at its lowest in more than five years on Comex. That move was attributed to a large seller.
China offered a rare peek into its financial system on Friday, releasing an update on its gold reserves for the first time in six years. At the end of June, its gold holdings totaled 53.32 million troy ounces, up 57% from the end of April 2009.
Still, the reserves were lower than many market participants had expected, given the country is the world’s largest producer of gold and has vied with India as the world’s largest consumer of the precious metal.
Ross Norman, chief executive of London-based bullion broker Sharps Pixley, estimated the figure was roughly half the market consensus.
The report on China’s reserves tops a growing list of factors tarnishing the precious metal in recent weeks. Positive U.S. economic data, from home-building statistics to consumer prices, has firmed expectations the U.S. Federal Reserve will raise short-term interest rates later this year.
Some analysts say that’s also sparked selling among funds skeptical the metal will resume its decade-long rally, which ended in 2011. Higher bond yields and a resurgent U.S. dollar diminish the appeal of gold, which produces no income and costs money to hold.
Other metals prices also declined Monday. Silver SIU5, -0.33% often considered a cheaper alternative to gold, has been beaten down, and September silver traded 0.5% lower to $14.76 an ounce. In other metals trade, October platinum PLV5, -1.80% skidded $21.70, or 2.2%, to $979.60 an ounce, while September palladium PAU5, -1.62% dropped $11.10, or 1.8%, to $607.90 an ounce.