Gold tumbled to its weakest in almost eight months in volatile trade on Tuesday, losing its safe-haven appeal as investors shifted some of their money back to the US dollar and oil further retreated from record highs.Platinum and silver also dropped to their lowest level since December to track gold, while thinly traded palladium touched its weakest since mid-October 2006. Panic-selling hit Tokyo, where platinum and gold futures sank by their daily limits.
Gold hit an intraday high of $825.85 before falling all the way to $801.90 an ounce, its lowest level since late December, as the euro struck a six-month low against the dollar.
“Frankly speaking, the way it's dropping, I think $800 will be taken out very soon. Just look at the rise in the dollar and plunge in the euro. Gold's decline is quite justifiable,” said Adrian Koh, analyst at Philip Futures in Singapore.
The euro fell to a six-month low against the dollar as mounting signs of economic difficulties in Europe, Asia and Australia diminished prospects of higher interest rates outside the United States, boosting demand for the dollar.
The dollar index, which measures the greenback against a basket of six currencies, hit a six-month high of 76.428. Oil was down 64 cents at $113.81 a barrel.
Despite a sharp drop in bullion prices, there was only light physical buying from jewelers, which suggested consumers were waiting for more declines.
Some dealers in Singapore reported tight supplies in gold bars as demand picked up since bullion steadily fell from a four-month high around $987 in mid-July.
“Gold has broken the chart points and everybody is rushing to sell their gold. It seems to be very bad. We are waiting for gold to hit $800,” said Ronald Leung, director of Lee Cheong
Gold Dealers in Hong Kong.
Physical demand from jewelers was also limited in Hong Kong, he said. “It's moving too fast and scares off physical buyers,” said Leung, who pegged the downside at $785.
The benchmark contract for June 2009 delivery on the Tokyo Commodity Exchange fell to ¥2,922 per gram – its lowest level in three months.
New York gold futures shed $14.2 at $814.20 an ounce.
Platinum fell to $1,475/1,490 an ounce from 1,517/1,537 an ounce, having hit an intraday low of $1,468.
“With everything falling, I guess platinum will follow suit. I am currently looking at the $1,400 levels for support,” said Koh of Philip Futures.
Platinum has taken a dramatic turn since spiking to a record high at $2,290 an ounce in early March, losing much of their gains to profit taking and a slowing US economy that threatens to slash demand for autocatalysts.
The bulk of the world's platinum is used by automakers in autocatalyst systems that scrub exhaust fumes of dangerous and environmentally damaging chemicals.
Silver dropped to $14.12/14.18 an ounce from $14.65/14.71 an ounce, while palladium fell to $305.50/313.50 an ounce from $317.00/325.00 late in New York. (Reuters)