Gold was whacked for a second successive day and took a hard fall on Friday around the world as investors abandoned the metal in the wake of the end of the Fed huge easing campaign, and then the sudden expansion of the similar spending program by the Bank of Japan, at one point trading at levels not seen since 2010, as the dollar surged in the wake of the surprise move from the Bank of Japan to expand its easing program.
Silver followed and the price of both are now looking as though they will head lower as the US dollar continues to rise.
And this is the reality of the outlook for gold and other commodities, the value of the US dollar will be a big driver, and the move by the Bank of Japan is going to be a big influence because it is directly aimed at forcing down the value of the yen against the greenback (Japan’s key currency relationship).
So as the dollar rises, commodity prices will weaken.
That’s why we saw Comex gold for December delivery slump $US27, or 2.3% on Friday, to settle at $US1,171.60 an ounce, closing out the week 5.3% lower.
It closed at $US1,174 after hitting a day’s low of $US1,165.41, the lowest since August 2010.
The precious metal shed 3.7% in October and is down 3.3% for the year to date.
December silver gave up 31 cents to $US16.11 an ounce, after being whacked on Thursday.
Traders said it was more the post-meeting statement from the Fed which did the damage on Thursday than the end of quantitative easing. Regardless of what hit the metal, it still lost 2.2% on Thursday.
The Bank of Japan move a day later added to the pressure, especially when the yen slid to a six year low against the greenback, and nervy investors sold out of the metal and silver.
Gold was also hit by the solid US growth figures on Thursday and negligible inflation.
Analysts at Commzerbank said gold has taken out the psychologically important $US1,200 per troy ounce mark, but also its four-year low of around $US1,180.
And Jim Wyckoff, a Kitco analyst, was more pessimistic on gold than he has been in a while, and noted that prices of the yellow metal could be in trouble if they don’t hold the $1,183 level.
“If [gold] prices fall below that, you’ll probably see a stiff leg down in prices, and a challenge of $1,000 could not be ruled out,” he warned.
The Financial Times reported that gold prices in China, the largest buyer of the yellow metal, followed the global rout. Gold in Shanghai fell 2.9% on Friday to its lowest level since the end of 2009.
Chinese gold consumption for the first three quarters fell 21.4% compared with the same period last year to 754.8 tonnes, the China Gold Association said Friday.
This reflects the impact of the continuing anti-graft policy of the Government, a point forgotten by the few gold bugs who have forecast rising Chinese demand.
High-grade copper for December delivery eased 2 cents to $US3.05 a pound, which was not a substantial move compared with what happened to gold.
Chinese trade figures next Saturday could prove to be a big influence with rumours the country’s commodities buyers have been mopping up copper at present levels in recent weeks.
The lower gold price has hit miners of the metal. The GDX stock index of large gold miners has fallen 17% this month.
Goldcorp, the world’s largest gold company measured by market value, reported Thursday that its third-quarter earnings more than halved to $US70 million from $US190 million a year earlier.
Australia’s biggest gold producer, Newcrest Mining, shed 11.7% to $9.32 over the month as the precious metal’s spot price tumbled. Another big fall awaits the shares today.
