Gold prices down, hit 5-year low

Meanwhile, in its first update since 2009 the People’s Bank of China said it owns about 1,658 metric tonnes of gold, which indicates it purchases approximately 100 tonnes of the metal each year.

“It looks like the end of an era for gold”, Howie Lee, analyst at Phillip Securities in Singapore, told Reuters, saying China has been grappling with oversupply after importing a record volume in 2013. ETFs that track the price of gold hit 52-week lows today, and are now down roughly 17% from their 52-week highs dating back to last August and off 6% to 7% for the year.

The U.S. dollar has been on a tear of late, driving down the relative price of commodities whose value is measured in that currency.

“Those two infamous days in gold’s history was marked by a constant decline in prices throughout both sessions, while yesterday’s tumble was marked by a one-minute drop followed by a substantial recovery”, said Lee.

Other precious metals also forged multi-year lows on Monday.

The price of oil was no exception, with the price of the North American benchmark WTI losing 96 cents to $49.94 US a barrel.

Spot gold stood at US$1,105.70 per ounce at 1213 GMT on Tuesday, but Monday’s move has left the market vulnerable to further slippage – possibly paving the way toward US$1,000 per ounce.

Shanghai’s sell-off was immediately prefaced by an “unusual spike” in trading volume on the Comex, he added.

Spot gold hit $1,088.05 an ounce – its weakest since March 2010 – shortly after the Shanghai Gold Exchange opened, possibly paving the way toward $1,000 per ounce.

The price of gold fell to five-year lows Monday as the dollar remained strong and the Federal Reserve continued to send signals it plans to raise interest rates soon. Silver dived to $14.54 per ounce, the lowest level in almost six years.

Gold no longer has the allure it once had for funds, as a failure to perform when its price was expected to rise and recent volatility, prompt them to seek returns and protection elsewhere.

Despite the tonnage increase, gold now accounts for 1.65 percent of China’s foreign exchange reserves, against 1.8 percent in June 2009.

In fact, paper demand for gold from ETFs and stock exchanges has been declining over the past four years, said OCBC Bank economist Barnabas Gan, and it would be hard even for the world’s largest gold importer to buck this trend. In addition, investors generally buy gold during times of uncertainty.

Some analysts noted China’s buildup of gold reserves was smaller than expected but acknowledged that does not fully explain the intense speculative selling in thin, early Monday morning trading.