LONDON: Gold fell more than 1 percent to a five-year low yesterday as a bounce in the dollar fuelled downside momentum, with investors continuing to pull away from the metal after its dramatic slide earlier this week.
A looming rise in US interest rates, the first in nearly a decade, has dented gold’s investment appeal, encouraging more sellers in the market after Monday’s 3 percent rout, its biggest one-day drop since September 2013.
Spot gold was down 1 percent at $1,090.70 an ounce at 1400 GMT, while US gold futures for August delivery were down $14.50 an ounce at $1,089.00. Earlier, spot prices touched their lowest since March 2010 at $1,087.04 an ounce.
Gold’s decline yesterday picked up momentum after the dollar moved into positive territory against a basket of currencies. “We have a lot of pockets of weakness currently in the gold market, and that is what is feeding the bearish sentiment we see,” Julius Baer analyst Carsten Menke said.
“The risk is increasing that you see more capitulation from holders of physically backed products.With prices below $1,100, more investors could get cold feet. Another washout from these products would certainly be a major negative.”
Monday’s selloff came on the back of huge volumes traded on the Shanghai Gold Exchange after investors dumped more than $500m of bullion in New York in four seconds during early Asian trading hours. Reuters
