Gold falls to its lowest price in five years
Gold sank unexpectedly overnight yesterday, the lowest in more than five years, amid prospects for higher US rates and after China said it held less metal in reserves than some analysts had expected.
In about 15 minutes during Asian trading hours yesterday, prices fell the most in two years, sliding below key levels watched by investors who use chart patterns to trade.
While gold later recovered some of the losses, it's still at a five-year low and headed for a sixth day of declines.
Gold for immediate delivery retreated 2pc to $1,112.04 an ounce at 11:23am in London.
Mark O'Byrne of Dublin-based gold-broker Goldcore, said it is difficult to pinpoint one factor to explain the price drop.
"The sell-off appears to have come about due to massive concentrated selling in the futures market by one or two funds or banks," said Mr O'Byrne.
"Some 700,000 ounces or $2.7 billion worth of gold was sold in less than two minutes," Mr O'Bryrne said
"The equivalent of one-fifth of a whole day's trade in a normal session, was sold in a concentrated manner in Asian trade.
"The sharp selling occurred when most markets were closed, and the impact of stop-loss sales was magnified by the lack of liquidity."
Mr O'Byrne said concerns about a Federal Reserve interest rate increase are also weighing on the market.
But he added he would be surprised if this was not already priced in, as it has been well flagged.
China, the world's largest consumer of bullion, reported gold reserves on Friday that were smaller than analysts had expected.
Prices fell below the 2014 low, a level that makes the metal vulnerable to more losses, Georgette Boele, a strategist at ABN Amro Bank in Amsterdam, said.
"This sudden drop during Asian trading seemed to have been triggered by some stop-loss selloffs that have nothing to do with fundamentals," Wallace Ng, a trader at Gemsha Metals said from Shanghai.
Gold has fallen out of favour as Federal Reserve Chair Janet Yellen prepares to raise rates this year.
Money managers are holding the smallest net-bullish bet on gold since the US government data begins in 2006.
In the first update since 2009, the People's Bank of China said on Friday that it owns about 1,658 metric tonnes, which implies gold purchases of 100 tonnes a year.
That's less than brokers expected. (Additional reporting: Bloomberg)