Gold Falls to Lowest Level in Five Years on Dollar Strength

Photo Credit:Reuters/Osman Orsal* U.S. gold futures fall over 1 pct, down 10th day * Biggest gold ETF holdings hit lowest since 2008 * Coming up: U.S. existing home sales at 1400 GMT * By Jan Harvey LONDON, July 22 (Reuters) – Gold fell back towards five-year lows on Wednesday as investors continued to pull away from the precious metal, with a slide through key chart levels earlier this week setting prices up for further losses. A lack of liquidity, with Japanese markets closed for a holiday, hastened the slide.

The yellow metal’s collapse in overseas markets predominantly triggered a fear among domestic investors forcing them to unwind their position heavily after a long weekend.

“I think there is still going to be a little bit of pressure”, said Victor Thianpiriya, a commodity strategist at ANZ Bank.

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Investors are finding less and less reason to hold gold as an insurance against risk, while the dollar is strengthening ahead of what is expected to be the first increase in US interest rates for almost a decade. The US dollar index, which tracks the price of the US dollar against the world’s currencies, has increased by more than 20pc within the past year. On a typical day, 16 tons of gold trade on that exchange.

“This presents a good opportunity for buyers to plan purchase of gold for the festive and wedding seasons in November and December”, said Bachhraj Bamalwa, former president of All India Gems and Jewellery Federation.

The price fell to $1,088 a troy ounce – a level last seen in March 2010 – after a flurry of selling on a US futures platform and the Shanghai Gold Exchange sparked talk of a another concerted raid in metals markets by Chinese hedge funds.

That took prices to their lowest in more than five years at US$1,088.05 an ounce, the 50 per cent retracement of gold’s long-term rally from 1999 to its 2011 record high. “Short-term supports sit at $1,085 and $1,050, while topside resistance at $1,130 looks pretty solid”. The sellers collectively made around $1.3 billion. Financial news agencies reported on the sales in Shanghai.

Spot platinum fell for the fifth straight session, down 5 percent to a fresh 6-1/2-year low of $942.49 an ounce, due to oversupply, sluggish demand and weaker gold prices, which encouraged speculative selling.

Palladium dropped as much as 3.4 percent to its lowest since October 2012 at $593 an ounce, before cutting some losses to trade down 1.4 percent at $605.25. Silver, too, shed 1.2% at $14.65 an ounce.