Gold prices continued falling Monday, hitting a more than a five-year low in Asia trade, amid growing expectations for an increase in U.S. interest rates and after China disclosed an update on its gold reserves that was far lower than expected.
August gold futures slid 2.3%, or $25.40, to $1,106.50 a troy ounce, a level last seen in March 2010.
“This kind of sharp drop during early Asian hours is a strong indication that a big fund is selling their holdings of gold,” said Gnanasekar Thiagarajan, director of Commtrendz Risk Management.
The move follows a sharp drop in gold prices in U.S. trading on Friday, when gold settled at its lowest in more than five years on Comex. That move was attributed to a large seller.
The report on China’s reserves tops a growing list of factors tarnishing the precious metal in recent weeks. Positive U.S. economic data, from home-building statistics to consumer prices, has firmed expectations the U.S. Federal Reserve will raise short-term interest rates later this year.
Some analysts say that’s also sparked selling among funds skeptical the metal will resume its decadelong rally, which ended in 2011. Higher bond yields and a resurgent U.S. dollar diminish the appeal of gold, which produces no income and costs money to hold.
China offered a rare peek into its financial system on Friday, releasing an update on its gold reserves for the first time in six years. At the end of June, its gold holdings totaled 53.32 million troy ounces, up 57% from the end of April 2009.
Source: MarketWatch |