Wednesday, 20 February 2013

Gold futures plunging further

By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — Gold futures took another tumble in Asia on Thursday, dropping almost $20 an ounce as investors moved out of the precious metal.
Comex gold for delivery in April GCJ3 -0.79% fell $19 in electronic trade to hit $1,559.00 an ounce.

Reuters
In regular trading on Wednesday, gold skidded $26.20, or 1.6%, to settle at $1,578 an ounce on the Comex division of the New York Mercantile Exchange, marking its fifth straight session of losses. Read: Gold sinks below $1,600 amid ‘death cross’ talk
“Bullion’s slide continued amidst heavy macro-hedge-fund liquidation in early trading ahead of the release of Federal Open Market Committee meeting minutes,” said HSBC metal analysts, discussing Wednesday’s losses in New York.
The regular Comex session for gold closed before the release of the Federal Reserve minutes, which prompted another drop in the gold price to $1,570 an ounce on Globex.
The Federal Reserve meeting minutes stoked concerns that policy makers could pull back on their massive quantitative-easing program, as the U.S. central bank said that it would review the program in March. Read: Fed, uneasy over ‘QE,’ plans bond-buy debate
The Fed’s quantitative easing has supported gold due to worries that it may spur inflation. As a result, any indication that the Fed may scale back or end bond buying soon pressures gold prices. Gold is traditionally seen as a hedge against inflation.
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Why Is gold slumping again?

The price of gold, which touched $1,750 an ounce in December, is now around $1,600 - and falling.
A pullback in quantitative easing can be seen as a reaction to an improving economy, and the HSBC analysts said the recent “ongoing liquidation” in gold prices “seems to be in response to an easing of financial-market anxieties and equity-market strength.”
“Gold also was undermined by a drop in the 50-day moving average below the 200-day moving average, which encouraged technical selling,” the analysts said, referring to a phenomenon sometimes known as a “death cross” and considered a bearish signal.
Still, Tyche Group associate director Martin Hennecke said that he believes gold’s recent losses present a buying opportunity.
He said that last weekend’s Group of 20 statement, in which countries pledged not to engage in competitive devaluation of their currencies, as well as the Fed minutes and gold selling in the last quarter of 2012 by notable investors, have spooked the markets lately.
Hennecke said, however, that the debt position of many countries remains as weak as ever, and he believes that they will continue to print money to devalue their currencies in order to control debt.
“They have no choice but to print,” he said. “I think there will be upside [for gold] as people come to realize that the crisis isn’t over.”
Around the wider metals complex, March silver SIH3 -0.51%  slipped 10 cents to $28.50 an ounce, while March copper HGH3 -0.76%  lost 3 cents to trade at $3.58 a pound.
Platinum for delivery in April PLJ3 +0.26%  dropped $27 to $1,620.10 an ounce, and March palladium PAH3 -1.05%  fell $8.50 to $727.90 an ounce.
Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW.
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