Gold fell below $1,600 an ounce to settle at the lowest level in five months as a stronger dollar curbed demand for the metal as an alternative asset. Silver, platinum and palladium also slumped.
The dollar rose to an 11-month high against the euro on signs of increased funding stress as Europe battles to tame its debt crisis. Gold closed below its 200-day moving average today, signaling prices may drop to $1,400, according to
Stifel Nicolaus & Co. The value of a 100-ounce futures contract traded in New York dropped by more than the $8,500 maintenance-margin requirement today, potentially prompting margin calls.
“The kind of waterfall decline we have seen in gold indicates a significant degree of forced selling emanating from the hedge-fund world,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in a telephone interview.
Gold futures for February delivery fell 4.6 percent to settle at $1,586.90 at 1:44 p.m. on the Comex in New York, the lowest closing level since July 13. Today’s drop is the biggest since Sept. 23. Earlier, prices touched $1,565.70, the lowest since Sept. 26.
The metal’s 200-day moving average is near $1,613. A close below that level would “cause traders to sit up and take note,” Brenda Sullivan, an analyst at Sucden Financial Ltd. in London, said today by telephone.
The Federal Reserve yesterday said the U.S. economy is maintaining its expansion and refrained from taking new action to bolster the economy. The dollar gained for a third straight day against a six-currency basket.
Market ‘Turbulence’
“There is turbulence across the commodity market because of the strength in dollar,” Jochen Hitzfeld, an analyst at UniCredit SpA in Munich, said in a telephone interview. “No further stimulus from the Fed is bearish for the market.”
Gold, in the 11th year of its longest winning streak in at least nine decades, is poised to enter a bear market, Dennis Gartman of the Gartman Letter said Dec. 13.
Silver futures for March delivery dropped 7.4 percent to $28.935 an ounce, the biggest slide since Sept. 23. Earlier, prices touched $28.53, the lowest since Oct. 5.
On the New York Mercantile Exchange, palladium futures for March delivery retreated 6.7 percent, the most since Nov. 17. Platinum futures for January delivery slumped 4.4 percent.
“We are seeing big risk-off due to Europe,” Bart Melek, an analyst at TD Securities in Toronto, said by e-mail. “Investors are looking for liquidity, selling everything they can to limit risk.”
--Bloomberg News--
