Global gold prices dropped more than 1% in intraday trade on Wednesday to hit a fresh five-year low, as a strengthening dollar and gloomy forecasts by analysts trimmed the appeal of the precious metal.
Earlier in the day, spot gold extended Monday’s 3% slide to hit $1,087.04 an ounce in the US — its lowest since March 2010 — before recovering to $1,088.78 an ounce by 1213 GMT. US gold futures for August lost $15.50 an ounce at $1,088.00.
In Delhi, spot gold prices slumped by R300 to trade at a fresh four-year low of R25,250 per 10 gram.
The expectations that the US Federal Reserve would raise interest rates this year, the first time in a decade, drove up the dollar against a basket of currencies on Wednesday and also raised the lure of other competing investment products. It also tempered fears of inflation, giving a blow to gold’s appeal as a hedge against inflation.
Even holdings in SPDR Gold Shares, the world’s biggest gold-backed exchange-traded fund, also dropped for a fourth day on Tuesday, falling another 4.8 tonne to hit their lowest since 2008. The reserves with the ETF have almost halved from their 2012 peak.
“Our next price target is seen at $1,044, the 2010 low, followed by $1,006, the late 2009 high,” technical analysts at ScotiaMocatta wrote in a note.
Tracking gold, spot platinum lost 1.8% at $959.49 an ounce, while palladium dropped 2% at $612.80, both trading near multi-year lows. Silver, too, shed 1.2% at $14.65 an ounce.
‘Gold may drop below $1,000 per ounce’
Goldman Sachs Group’s Jeffrey Currie told Bloomberg that the worst is yet to come for gold and that prices could fall below $1,000 an ounce for the first time since 2009. “With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the US dollar becomes less and less important,” said Currie, who told investors to sell in 2013 before the metal’s biggest collapse in three decades.
Although Currie hasn’t given a time frame for such a drastic fall, ABN Amro Bank’s Georgette Boele and Robin Bhar of Societe Generale say the bullion will approach $1,000 by December this year.