Gold Crushed in Historic Rout
The price of gold tumbled on Monday to well below $1,400 per ounce, its lowest since March 2011, as investors took fright at a market that is heading for its biggest two-day fall in 30 years.
Gold has capitulated in the last two trading days to pressure from a proposed sale of Cypriot gold holdings and concern that other nations might follow suit. Traders also cited concern that the U.S. Federal Reserve might reduce monetary stimulus towards the end of the year..
"You can't stand in front of a steam train - the market has to run itself out and then I think you will see some meaningful correction towards the $1,510-$1,525 level," said Gerhard Max Schubert, head of commodities at Emirates NBD bank in Dubai.
Weaker than expected Chinese economic data earlier on Monday simply gave investors another excuse to slash holdings as other commodities including oil and copper dived.
U.S. futures for June delivery fell more than six percent to $1,385, the largest daily drop since June 2006.
"We are entering a phase of additional long liquidation by ETF investors and short-selling from hedge funds, which will continue in the foreseeable future," Saxo Bank senior manager Ole Hansen said.
"Purely looking at the charts, support would now be at $1,300, which would equate the 50 percent retracement from the rally from the Lehman crack in 2008 to the September 2011 record high."
READ: Will the selling continue?
Other precious metals were also hit by heavy selling, with silver falling to its lowest since October 2010, platinum at its weakest since August last year, and palladium hitting a three-month low.
By contrast, hedge funds and money managers raised their net longs in gold futures and options in the week to April 9, a report by Commodity Futures Trading Commission (CFTC) showed on Friday.
Investors cut exposure to gold, with total holdings at the world's major bullion gold-backed exchange-traded-funds falling to their lowest since early 2012.
Holdings of the largest fund, New York's SPDR Gold Trust GLD fell a further 22 tonnes on Friday.
Investors have been dumping gold for the past three weeks. Even escalating tensions on the Korean peninsula and Japan's aggressive monetary stimulus have failed to burnish its safe-haven appeal.
Cyprus's plan to sell gold reserves to raise around 400 million euros ($525 million) has raised concerns other indebted euro zone countries could follow suit.
"Investors are worried that Cyprus can set a precedent and other central banks follow, and this is bearish also considering that one of the pillars for gold's bull-run in recent years has been central banks' buying," Hansen said.
Meanwhile a hint that monetary stimulus might be reduced by the United States could further dent gold's appeal.
"What we now see is panic selling, perhaps triggered by the Fed's stimulus view. The Fed has given the signal that there's a possibility to reduce QE, and that took a lot of trust out of gold," said Dominic Schnider, an analyst at UBS Wealth Management.
While policy doves currently hold sway over Chairman Ben Bernanke and the majority of Fed policymakers, minutes from last month's policy meeting suggested the quantitative easing programme could draw to a close by year-end, earlier than some economists had expected.
Silver was down 6.1 percent to $24.29 an ounce, having fallen to its lowest since October 2010 at $22.97.
Spot palladium dropped 6 percent to its lowest since Jan. 8 at $665.75 and was then seen at $680, down 3.7 percent, while spot platinum was down 2.2 percent at $1,455, having earlier dipped o an eight-month low of $1,418.99. (Additional report by Lewa Pardomuan and Manolo Serapio Jn in Singapore; editing by Jane Baird and Keiron Henderson)