Gold slid 2 percent on Monday and silver slumped to its lowest since 2009 after Swiss voters overwhelmingly rejected a proposal to boost central bank gold reserves, providing a new trigger for sell-offs in an already nervous market.
The “Save our Swiss gold” initiative, which would have compelled the Swiss National Bank to boost its gold reserves to 20 percent of its assets from around 8 percent currently, was rejected by 77 percent of voters.
Spot gold dropped as far as $1,142.91 an ounce, its lowest since early November when it marked a 4-1/2 year low of $1,131.85. It was down 1.3 percent at $1,151.61 by 0555 GMT.
Spot silver fell as much as 6.4 percent to $14.42 an ounce, its weakest since August 2009.
U.S. gold futures declined nearly 3 percent and silver futures tumbled 9 percent, before recovering slightly.
“A ‘no’ was expected but there was probably a risk premium factored in. That’s why we are seeing this liquidation today,” said a Sydney-based precious metals trader. He said there were huge stop-loss orders below $15 for silver. “The move happened in thin market conditions, even before Tokyo opened. The lack of buying interest and the stop-loss orders triggered this big move.” Also weighing on precious metals was the weakness in oil prices, which prompted investors to believe inflationary pressures would soften.
Bullion is seen as a hedge against inflation. U.S. crude fell to a five-year low on Monday, while Brent futures touched a four-year trough, extending a steep decline after OPEC decided not to cut production. Strength in the dollar and equities also dulled gold’s appeal as a hedge.
Monday’s losses in gold and silver come just after the metals had recovered modestly from their drop to four-year lows a month ago. Analysts had warned that the short-covering rally could be temporary and prices could return to lower levels before year-end. “There is very little that has changed in the gold landscape since last month; inflation is a non-issue and looks even more remote now that energy prices are beating a hasty retreat,” INTL FC Stone analyst Edward Meir said in a note.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.17 percent to 717.63 tonnes on Friday – a six-year low. The decline in gold prices comes despite good news from the physical markets, where India, the second-biggest consumer of the metal, eased curbs on imports that have been in place for over a year. The move could potentially boost demand and imports from the country. In top consumer China, premiums were steady at about $1-$2, reflecting strong buying interest.