Gold prices plunge to five-year lows

Bullion fell to as low as $1,088.05/oz – its weakest since March 2010 – shortly after the Shanghai Gold Exchange opened trading, with volumes soaring to a record level.

People, who have invested in gold, have a very bad news, as prices of the yellow metal, have reached the five-year low with a decline by 4%.

China offered a rare peek into its financial system on Friday, releasing an update on its gold reserves for the first time in six years. Palladium dropped as much as 3.4 per cent to its lowest since October 2012 at $593 before cutting losses to trade just above $600.

Miners’ shares retreated in Sydney and Hong Kong after prices slumped unexpectedly, losing more than $40.

Investors turned to the U.S. dollar, which rose on the likelihood of the Federal Reserve raising rates because of a stronger U.S. economy. “But this sudden drop during Asian trading seemed to have been triggered by some stop-loss selloffs that have nothing to do with fundamentals”.

Evolution mining was down over 13% in early trade, while Regis Resources, Northern Star Resourcs and Newcrest Mining were all lower by over 8%.

A break of the May trough around US$1.0818/19 would likely embolden bears to head for the April lows at US$1.0521.

Some investors are turning away from precious metals amid a wider retreat in raw materials.

“I’m still bearish on gold”, said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp, the most accurate precious metals forecaster in the eight quarters to March, according to Bloomberg ranking.

As the threat of a rate hike in the USA increases so does the value of the USA dollar. Higher bond yields and a resurgent USA dollar diminish the appeal of gold, which produces no income and costs money to hold. The 18ct non-hallmarked gold scrap and 22ct non-hallmarked gold scrap prices are also traded down to $787.49 an ounce and $961.788 an ounce respectively.

Spot gold was down 2.3 per cent at $1,107.20 an ounce by 0423 GMT.

“Any increase in US interest rates should further strengthen the dollar, prompting more fund outflows from commodities, metals and emerging-market assets”, Vattana Vongseenin, the chief executive officer of Phillip Asset Management Co.in Bangkok, said by phone.