Gold crashes on US rate rise fears

Gold suffered a big jolt and plunged sharply to touch a two-year low at the bullion hub in Mumbai as panic-stricken investors and speculators went on a selling spree sparked by global liquidation worries.

Janet Yellen, the chair of the US Federal Reserve, said that interest rates might rise by the end of the year.

Gold suffered most of its losses on Monday in a matter of minutes during early morning hours in Asia, as a bout of technical selling kicked in after prices broke below key support levels, triggering fresh sell orders amid bearish chart signals.

The price of gold fell to its lowest level in five years in trading early Monday.

A looming hike in U.S. interest rates has dented gold’s appeal as an investment, encouraging more sellers in the market after Monday’s 4-percent rout.

China has already suffered buffeting in its stock market, which halted following government intervention.

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.

The selling followed China’s Friday announcement that it increased its gold reserves much less than expected over the past six years.

Holdings in the world’s biggest gold-backed exchange-traded fund (ETF), SPDR Gold Shares, fell for a fourth day on Tuesday, declining another 4.8 tonnes to hit their lowest since 2008.

“But in the futures market, because it’s all digital, as long as you find a buyer to bid for it then that would be possible”, said Luke Chua, sales and operations manager at Bullion Star, a precious metals dealer in Singapore.

Gold prices hit a five year low on Monday, but New Zealand investors are well placed to take advantage, a trader says.

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 1.6 percent at $606.47.

“In the physical market this would not be possible because that would consume a whole lot of physical gold”.

“A repeat of history does not look to be on the cards but we still expect heavy downward pressure on gold in the future”. Silver for September delivery was recently down 0.7% at $14.685 a troy ounce.

“In New Zealand dollars we’re looking at $1675 an ounce”. US gold futures for August lost $15.50 an ounce at $1,088.00.

Prices, which fell over the past seven sessions in a row, haven’t settled at levels this low since March 30, 2010, based on the most-active contracts.