London- Gold fell to the lowest in more than 2 1/2 years in London, exceeding April’s drop into a bear market, after US Federal Reserve Chairman Ben S. Bernanke said stimulus may be reduced later this year as the economy recovers.
Other precious metals declined.
Bernanke said yesterday the central bank, which currently buys $85 billion of Treasury and mortgage debt each month, may begin reducing purchases this year and end the program in 2014 should the economy continue to improve.
The dollar rose to the highest in more than a week against six major currencies and the 10-year yield on Treasuries reached a 15-month high.
Commodities dropped.
Bullion slid 22 percent this year, heading for the biggest annual drop since 1981, as some investors lose faith in it as a store of value and as speculation grew that the Fed will taper debt buying that helped the metal cap a 12-year bull run last year.
Investors sold 520.7 metric tons valued at $22 billion from gold-backed exchange-traded products this year.
The price slump hurt billionaire hedge fund manager John Paulson and producer Newcrest Mining Ltd.
“The markets are definitely not prepared to wait until the tapering actually begins,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen.
“The combination of Fed tapering, a spike in nominal yields and a stronger dollar has put gold under some considerable pressure.”
Gold Price
Gold for immediate delivery dropped as much as 3.4 percent to $1,304.75 an ounce, the lowest since September 30, 2010, and traded at $1,312.77 by 9:53 a.m. in London.
Bullion for August delivery sank as much as 5.1 percent to $1,303.30 an ounce on the Comex in New York and was last at $1,312.
The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.4 percent since the start of January, the MSCI All-Country World Index of equities rose 5.6 percent and the US Dollar Index added 2.7 percent.
A Bank of America Corp. index shows Treasuries lost 1.9 percent.
Newcrest Mining, Australia’s largest gold producer, said this month it will write down the value of its assets by as much as A$6 billion ($5.5 billion) after the slump in prices.
Holdings in the SPDR Gold Trust, the largest gold ETP, slumped 351.3 tons this year to 999.6 tons yesterday, the lowest since February 2009.
Global holdings now stand at 2,111.2 tons, the least since March 2011, data compiled by Bloomberg show.
While assets dropped every month this year, gold’s slump in April spurred purchases of coins and jewellry worldwide.
“$1,300 would be the next support level for gold,” Walter de Wet, an analyst at Standard Bank Plc, said today by phone from Johannesburg.
“We are likely to see buying coming through, but I would be surprised to see the same level as we saw in April.”
Silver for immediate delivery slid as much as 6.2 percent to $20.0845 an ounce in London, the lowest since September 2010, and was last at $20.2875.
Platinum dropped 1.1 percent to $1,400.18 an ounce.
Palladium was down 1.8 percent at $680.95 an ounce. - Bloomberg News