Gold Dropped To 34-Month Low, Dived Below $1200 Ounce

By Mani
Updated on

Gold futures slumped to a 34-month low and headed for the worst quarterly slump on record amidst Federal Reserve comments on tapering stimulus.

Gold Dropped To 34-Month Low, Dived Below $1200 Ounce

Gold futures plummeted below $1,200 a troy ounce, as U.S. economic data topped analysts’ estimates. However, gold steadied on Friday after posting its lowest level since August 2010.

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Last week, Federal Reserve Chairman Ben Bernanke hinted that the U.S. might begin tapering its massive bond buying program. As a result, the view of gold as a safe haven for investors became damaged. If the Fed does begin tapering off its $85 billion per month bond purchases, then interest rates would likely rise, which would make gold less of an interest for investors.

The most actively traded August delivery contract settled to $18.20, falling 1.5 percent. The store-of-value metal hit $1,211.60 a troy ounce on the Comex division of the New York Mercantile Exchange. However, after the market’s close, in electronic trading, gold futures dived through $1,200 an ounce before showing some rebound above the key level.

Gold Futures Fell 25 Percent This Quarter

Gold futures fell 25 percent this quarter, heading for the biggest loss since at least 1975.

However, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, were unchanged at near four-year lows for a second consecutive day on Thursday. The fund has recorded unprecedented outflows of 12.26 million ounces so far this year, down 28 percent to 31.7 million ounces.

Technical View

Some analysts following technical charts predict an imminent rebound in gold prices. Gold futures’ 14-day relative strength index was at 20.7 today, and since June 24 has been below the level of 30. The metal’s 60-day historical volatility reached 32.5 percent yesterday, the highest since October 2011, and was at 32.3 percent today.

The yellow metal is now headed for its biggest decline since at least 1920 in London, according to Joe Richter & Nicholas Larkin of Bloomberg. The yellow metal has declined 22.8 percent this quarter so far. It entered the bear market in April, retreating further from its all-time high of $1,921.15 in September 2011. Spot gold plunged 4.2 percent to a 34-month low of $1,223.54 an ounce. Analysts expect prices to decline further.

Earlier we reported how gold and silver were viciously attacked by the shorts this past week. We feel there is little doubt that since easy money was gleaned from the gold attack, the Feral Hogs will start looking to the oil market as their next target in the upcoming months.

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