Monday, September 26, 2011

Gold slumps 2 per cent, ends at $2,064 an ounce

Gold prices sank on Monday, sending the metal below US$1,600 (S$2,064) an ounce for the first time since July.

Gold slumped US$45, or 2 per cent, to close at US$1,594.80. Silver dropped 0.4 per cent to end at US$29.976 an ounce.

Gold plunged 9.6 per cent last week, following the stock market lower. Silver also lost 10.7 per cent.

The Dow Jones industrial average sank 6.4 per cent that week, the biggest drop since October 2008 at the height of the financial crisis.

Precious metal prices continued to fall on Monday even as the Dow gained 2.5 per cent. Stocks rose on optimism that European finance ministers might soon take action to stem the debt crisis there. The slump has marked a sudden turnaround for gold contracts, which were trading for US$1,859.50 an ounce earlier this month.

Part of the reason gold and silver prices continued their slide is that investment managers are selling off metals contracts to offset some of the losses in their stock portfolios, said George Gero, precious metals strategist at RBC Capital Markets.

While metals prices have fallen, they have still appreciated more over the last year than many stocks, Mr Gero said. That means traders can reap profits from selling gold contracts to offset losses in the stock market. Even after its recent plunge, gold is still up 26 per cent from this time last year.

Silver is up 44 per cent. Over the same time period the S&P 500 index is up just 1.2 per cent.
'They have to sell gold as one of their best performers,' Mr Gero said. 'We've been seeing deterioration (in the gold market) since the middle of August, when you started seeing these very volatile days in the stock markets.' December silver fell 12.5 cents, or 0.4 per cent, to end at US$29.976 an ounce. Silver had fallen much more during midday trading, dropping below US$28 an ounce before rallying in the afternoon.
December copper gained 0.3 cents, or less than 1 per cent, to finish at $3.283 per pound and October platinum fell US$66.30, or 4 percent, to US$1,546.90 an ounce.

December palladium fell US$15.10, or 2.4 per cent, to US$627.40 an ounce.

In other trading, benchmark oil gained 39 cents to finish at US$80.24 per barrel on the New York Mercantile Exchange.

Heating oil fell 0.29 cents to US$2.803 per gallon, gasoline futures rose 0.4 cents to US$2.5284 per gallon and natural gas fell 8.1 cents to finish at US$3.782 per 1,000 cubic feet.

September wheat gained 7.5 cents to end at US$6.4825 per bushel, corn rose 9.5 cents to US$6.48 per bushel and soybeans fell 1.75 cents to finish at US$12.5975 per bushel.

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