Gold slides below $1,200/oz on euro volatility

By Frank Tang

NEW YORK (BestGrowthStock) – Gold slid more than 2 percent on Wednesday, the biggest one-day fall since February, with traders cashing in profits from last week’s record high as equity and commodity markets fell on deepening euro zone worries.

After soaring to a record $1,248.95 last week on a rush for safety from European buyers, gold has now shed $40 an ounce in three days as investors sought to realize some profits as other markets spiral lower, a decline worsened by technically based selling as the market crosses key triggers.

Industrial metals fell even harder, in line with further losses for copper and oil, with palladium slumping nearly 8 percent to its lowest since late March as volatility in the euro, Germany’s partial short-selling ban and global equity losses all fed fears of worse times to come.

“When we hit all-time highs, everybody thought gold was going to shoot straight up to the moon. Now, a lot of people have decided to take their profits, and the big banks just put in sell orders that hit the market,” said COMEX gold floor trader Dominick Cognata.

“I don’t think the selling is over yet. I think we still have another $20 on the downside.”

Spot gold fell 2.3 percent or $27.80 an ounce to $1,191.90 by 4:21 p.m. EDT (2021 GMT), just off its intraday low of $1,186.62 an ounce.

U.S. gold futures for June delivery on the COMEX division of the NYMEX fell $21.50, or 1.8 percent, to settle at $1,193.10 an ounce.

Gold’s long bull run has typically been fueled by either its value as a safe-haven asset in turbulent times or a hedge against dollar inflation, but neither helped it on Wednesday.

Rather than benefit from turbulent external markets, gold was caught in broad-based selling: the euro rebounded from a four-year low versus the dollar on speculation that European officials might act to support the currency; contagion fears over Greece’s debt crisis knocked other assets lower.

The S&P 500 U.S. stock index fell more than half a percent. (.N: )

“What is the use of an insurance policy if you can’t cash it in at some point?” said Daniel Major, an analyst at RBS Global Banking & Markets.

“The reason why people might hold a percentage of their portfolio in gold is because it is generally uncorrelated to other assets, and people could easily be selling it down to cover margin calls in many other asset classes.”

TECHNICALS EXACERBATE DECLINE

A two-day, $30 decline in spot gold sent prices below support at its 14- and 21-day moving averages. Also, some analysts suggested a sell signal could be seen according to the moving average convergence/divergence analysis (MACD).

COMEX open interest tumbled more than 20,000 to about 580,000 lots as of Tuesday, but still held near a record high set on Monday, suggesting rising volatility after a sharp rally to all-time highs, traders said.

Platinum group metals and silver tumbled on fund unwinding after recent rallies and as a euro zone debt crisis hampered demand expectations for industrial metals.

Investment in gold stood firm, with holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, steady at a record 1,217.108 tonnes on Tuesday.

Other precious metals also declined sharply, with silver at $18.18 an ounce against $18.90, and platinum sliding more than 4 percent to a seven-week low at $1,578.55. It was last at $1,598.50 an ounce against $1,666.50.

Palladium was the biggest faller, slipping as much as 8 percent to a seven-week low of $454.88, as traders reported fund selling of the metal and risk aversion rose. The metal was still 13 percent higher year-to-date despite a drop from a two-year high of $570.50 last month.

Palladium was last at $456.25 against $495. Silver, platinum and palladium are more industrial in use than gold, and are therefore most exposed to weaker economic sentiment.

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(Additional reporting by Jan Harvey in London; Editing by Lisa Shumaker)

Gold slides below $1,200/oz on euro volatility