GOLDBUGS will be keeping a close eye on the yellow metal this week, after its price sank more than five per cent last Friday to below $1,500 per ounce.
Friday’s sell-off saw the precious metal post its biggest weekly decline since December 2011 as the spot price of bullion hit a low of $1,477, down 5.3 per cent on the day.
Selling became heavy after an unexpected contraction in US retail sales data, which hurt stocks and supported the dollar. It added to pressures that were building this week from several factors, including a draft plan for Cyprus to sell bullion and outflows from exchange-traded gold funds.
Losses in gold accelerated and trading volumes ballooned after prices fell through key support at $1,521 an ounce. The market is down some 23 per cent below a record peak of $1,920.30 hit in September 2011. Investors define a bear market as a decline of 20 per cent or more from a market high.
Bullion has soared for more than a decade due to its status as a safe-haven investment in troubled times and in response to inflation fears as the Federal Reserve embarked on an aggressive stimulus program to jump-start the US economy after the financial crisis.
But with signs of a tentative recovery now in world’s largest economy, further losses could be looming in gold. Speculative investors are holding one of their smallest net longs in the precious metal since December 2008.
City A.M. Reporter