London - Gold traded near a 34-month low in London as the worst quarterly slump in at least nine decades following the Federal Reserve’s comments on tapering stimulus may spur more physical demand.
Gold dropped 25 percent this quarter, heading for its biggest loss since at least 1920 in London.
Fed Chairman Ben S. Bernanke said June 19 that the Fed may begin tapering its bond- buying program this year.
US data may show today that consumer sentiment improved and business activity expanded, economists said.
Bullion slid 28 percent this year, set for the biggest annual drop since 1981, after rallying the past 12 years.
About $62.4 billion was wiped from the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value.
A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver, platinum and palladium, which are used more in industry than gold.
“ETF holders are still selling and no one wants to be in gold,” Marc Ground, a commodity strategist at Standard Bank in Johannesburg, said today by phone.
“We did see physical buying come in a bit and if that continues it will provide some support.”
Gold for immediate delivery added 0.2 percent to $1,202.70 an ounce by 10:04 a.m. in London, after reaching $1,180.50, the lowest since August 3, 2010.
Bullion for August delivery fell 0.8 percent to $1,202 on the Comex in New York.
Futures trading volume was almost double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Silver Price
Silver for immediate delivery rose 1.9 percent to $18.8495 an ounce in London, after reaching $18.2208, the lowest since August 2010.
It’s down 33 percent this quarter, the most since 1980. It’s the worst performer in the Standard & Poor’s GSCI gauge of 24 commodities this year.
Platinum, which entered a bear market last week, dropped as much as 1.6 percent to $1,294.18 an ounce in London, the lowest since October 2009, before gaining 0.6 percent to $1,322.45.
It’s set for a 16 percent quarterly decline, the most since 2008.
Palladium was up 0.1 percent at $645.58 an ounce.
It fell 16 percent since the start of April, the most since 2011.
Gold entered a bear market in April, extending the retreat from its all-time high of $1,921.15 in September 2011.
Price declines accelerated this year as US bond yields increased and the dollar strengthened.
Analysts from Morgan Stanley to Credit Suisse to Goldman Sachs cut gold forecasts this month on prospects for reduced asset purchases.
RSI Gauge
Gold’s 14-day relative strength index was at 21.1 today, and since June 20 has been below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent.
The metal’s 60-day historical volatility reached 32.5 percent yesterday, the highest since October 2011, and was at 32.2 percent today.
“The current environment is a fundamentally poisonous one for the yellow metal,” Christin Tuxen, a senior analyst at Danske Bank A/S in Copenhagen who sees gold at $1,000 in three months, wrote today in a report.
“Rising yields are upping the opportunity cost of holding gold, the initiation of a fundamental dollar up-trend weighs, inflation expectations are in decline as the commodities super-cycle wears off, and many tail risks have been sidelined.”
ETP Holdings
Global gold ETP holdings declined 9.5 metric tons yesterday to 2,048.7 tons, the lowest since May 2010, data compiled by Bloomberg show.
Investors sold 583.2 tons this year.
Billionaire John Paulson, the largest investor in the SPDR Gold Trust, the biggest gold ETP, kept his stake of 21.8 million shares in the product in the first quarter, a government filing showed in May.
Bernanke said last week that the US central bank, which currently buys $85 billion of Treasury and mortgage debt a month, may end the program next year if the economy continues to improve.
Data released this week showed US consumer spending, durable goods orders, and home sales rose in May, even as economic growth in the first quarter was less than previously estimated.
“We’ve had quite a lot of positive data out of the US and people are still focused on the tapering of stimulus, so gold’s been hit quite hard,” Alexandra Knight, an economist at National Australia Bank, said by phone from Melbourne.
“There’re still people who are interested in gold but because prices have fallen so much and so rapidly, they’ll wait for some stabilisation.”
Platinum and palladium are used in jewellry and pollution-control devices in cars.
European car sales fell to a 20-year low in May as rising joblessness caused by a recession in the euro region reduced demand, the Brussels-based European Automobile Manufacturers’ Association said June 18. - Bloomberg News