It hasn’t been too difficult to bet on the price of gold of late with prices dropping steadily over the last few years. But Monday’s plunge took the metal lower than even the analysts had anticipated.
Gold dropped in Asian trading for the sixth straight day losing 4.2 percent and reaching its lowest level in more than five years. Speculators attribute the descent to worries that the Fed would look at strong U.S. housing and inflation numbers and go ahead with its promise to raise interest rates in the next few months.
China’s Gold Reserves
The question of China’s gold reserves added to the plunge in gold prices as speculative trading on China’s Shanghai Gold Exchange caught investors by surprise.
Around 5 tonnes of gold was sold on the Exchange within the space of two minutes between 09:29 and 09:30. Victor Thianpiriya, commodity strategist at ANZ, told reporters, “It was down to speculation here, someone taking advantage of the low liquidity environment.”
Gold bullion fell as low as $1,086.18 an ounce, the lowest price since March 2010 and traded at $1,099.09 at 9:42 a.m. in Singapore. The yellow metal is down 6.4 percent on a year-to-date basis.
Experts are predicting a further slide in gold prices, especially if an interest rate hike is put into place.
"Wherever you look,” said Howie Lee, investment analyst at Phillip Futures. “There really is no support for the precious metal." Lee has been targeting gold to hit $1,100 since the start of the year.
