Precious Metals Routed as Gold Extends Decline

Gold Extends Decline to Five-Year Low

Precious metals were routed as gold sank to the lowest in more than five years on prospects for higher U.S. rates and after China said it held less metal in reserves than some analysts expected. Platinum plunged to the lowest since 2009, while silver and palladium lost more than 2 percent.

Bullion for immediate delivery tumbled as much as 4.2 percent to $1,086.18 an ounce, the lowest price since March 2010, and traded at $1,106.90 at 10:54 a.m. in Singapore. Miners’ equities fell as prices extended a fourth weekly loss.

Gold has fallen out of favor with investors as Federal Reserve Chair Janet Yellen prepares to raise rates this year, boosting the dollar. While China updated its bullion reserves on Friday for the first time since 2009, the 57 percent increase to 1,658 metric tons was smaller than had been estimated. Gold’s plunge raises the prospect of third straight annual drop.

“The market is in one of its bear phases, where any news is bearish news,” said Jack A. Bass Vancouver-based managing partner at Jack A. Bass and Associates, predicting that gold may drop as low as $1,050 an ounce. “People had expected China’s holdings to be higher,” said Bass , author of The Gold Investors Handbook. His managed accounts hold no gold or gold miners.

Newcrest Mining Ltd., Australia’s largest producer, lost 7.1 percent to A$12.26 in Sydney, while Evolution Mining Ltd. slumped 13 percent and Saracen Mineral Holdings Ltd. tumbled 13 percent. In Hong Kong, Zijin Mining Group Co. lost 3.8 percent.

“Gold has generally been suppressed by the ongoing expectation that the dollar may get stronger should the U.S. Fed raise interest rates,” Wallace Ng, a trader at Gemsha Metals Co., said from Shanghai. “But this sudden drop during Asian trading seemed to have been triggered by some stop-loss selloffs that have nothing to do with fundamentals.”

Commodity Losses

Some investors are turning away from precious metals amid a wider retreat in raw materials. The Bloomberg Commodity Index dropped for a fifth day on Monday to as low as 96.6395, heading for the longest run of declines since March.

China bought about 604 tons of gold since 2009, second only to Russia, according to data from the central bank and International Monetary Fund. The total holdings make China, the world’s biggest producer, the world’s fifth-biggest gold owner.

Prospects for a U.S. rate increase strengthened the dollar, hurting the allure of gold, which generally offers returns only through price gains. The Bloomberg Dollar Spot Index rose as much as 0.1 percent to the highest level since April 13.

‘Still Bearish’

“I’m still bearish on gold,” said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp., the most accurate precious metals forecaster in the eight quarters to March, according to Bloomberg rankings. “For the year-end, I’m still looking at $1,050 an ounce. The bearish outlook is underpinned by the likelihood of the U.S. Fed rate hike.”

Holdings in gold-backed exchange-traded products have shrunk as U.S. equities rallied and the dollar climbed. Global holdings were at 1,585.96 tons on Thursday, down from a record 2,632.5 tons in December 2012.

Gold futures retreated as much as 4.6 percent to $1,080 an ounce and traded at $1,109.50 on the Comex in New York. Money managers are holding the smallest net-bullish bet on gold since the U.S. government data begins in 2006.

Platinum for immediate delivery dropped as much as 4.7 percent to $947.38 an ounce, the lowest since January 2009, and traded at $962.90. The metal is 20 percent lower this year.

Spot silver lost as much as 2.3 percent to $14.5449 an ounce, the lowest since December 2014, and was at $14.6678. Palladium fell as much as 3 percent to $596.75 an ounce, the lowest since October 2012.

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