Gold, silver tumble to four-year lows

Gold and silver slumped to their lowest since 2010 on Friday as the dollar and stock markets soared following a new round of quantitative easing by the Bank of Japan and data showing a robust U.S. economy.

Spot gold slid 3 percent to its lowest since July 2010 at $1,161.25 an ounce in earlier trade and was down 2.8 percent at $1,164.64 by 1344 GMT.

The metal breached important support levels at $1,200 and $1,180, where stop losses — automatic sale orders — were placed and was on track for a 4.7 percent drop this week, the biggest weekly decline since June 2013.

U.S. gold futures were down $34.00 an ounce at $1,164.70.

“Spot gold is at its lowest for four years … and it could fall further towards the $1,120 level if the dollar strengthened even more significantly,” ActivTrades analyst Carlo Alberto De Casa said.

“More stop losses could be triggered if we consistently broke below $1,170, but the downside seems limited by the fact that we are close to cost of production above $1,000.”

Spot silver fell 4 percent to its lowest since February 2010 at $15.76 an ounce and was poised for a fourth monthly drop in a row. It was down 3.1 percent at $15.92.

Gold and silver were already facing some heat after the U.S. Federal Reserve earlier in the week largely dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might undercut progress towards its unemployment and inflation goals.

The hawkish comments and strong U.S. gross domestic product data on Thursday dulled gold’s appeal as a hedge against risk.

The dollar rose to its highest since June 2010 against a basket of currencies, boosted as well by the Bank of Japan’s surprise move to expand its massive monetary easing, which weakened the yen to near seven-year lows.

A stronger U.S. currency makes dollar-denominated assets such as gold more expensive for holders of other currencies.

“We hold a bearish view on gold, considering a recovering U.S. economy and expectations of higher rates,” said Chen Min, a precious metals analyst at Jinrui Futures in Shenzhen, China.

“In the long term, we believe gold is likely to break closer to $1,000.”

Reflecting bearish investment sentiment, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.16 percent to 741.20 tonnes on Thursday, a six-year low. [GOL/ETF]

NO SUPPORT FROM PHYSICAL MARKETS

Gold failed to get any support from the Asian physical markets, a factor that could push it to further lows. Physical demand usually provides a floor to dropping prices.

Buyers in top consumer China failed to emerge even after the drop below $1,200.

Premiums on the Shanghai Gold Exchange, the main platform for physical trades in the country, slipped on Friday to less than $1 an ounce, occasionally dropping to a discount against the global benchmark represented by the London spot price.

Premiums had ranged between $1 and $2 on Thursday.

The lower premiums underscore the soft appetite for gold in China after record consumption last year.

China’s gold consumption tumbled 21.4 percent year-on-year in the first nine months of 2014 to 754.8 tonnes, the China Gold Association said.

Among the other precious metals, platinum fell 1 percent to $1,224.49 an ounce, while palladium rose 0.6 percent to $779.10 an ounce.

reuters

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