Gold falls below $800 first time in one month; other metals also move lower
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Gold futures tumbled Thursday, at one point down more than 5% to below $800 an ounce for the first time in one month, as nervous investors seeking cash sold futures contracts.
Some hedge funds were forced to liquidate their positions to cover losses in stocks and other markets, according to economists at research firm Action Economics. Global stock markets saw another day of heavy selling Thursday.
"For the moment, the weight of the deep funk felt in the global markets is keeping gold on the defensive, while would-be buyers ... find more comfort sitting on the piles of cash," said Jon Nadler, senior analyst at Kitco Bullion Dealers.
Gold for December delivery fell more than 5% to $793.50 an ounce, dropping below the $800 mark for the first time since Sept. 17. Futures were last down $35.50, or 4.2%, at $803.50 an ounce on the Comex division of the New York Mercantile Exchange.
The contract has surrendered more than $100 an ounce since Oct. 8.
Also pushing gold prices lower were news reports that central banks were selling gold. The latest weekly data from the European Central Bank showed 7.6 tons of gold was sold during the week ended Oct. 10, according to Bloomberg, citing Barclays Capital.
Central banks sell gold to earn more cash, but their selling is helping push the gold prices lower, analysts said.
Gold lease rates charged by central banks have reached record highs, according to the London Bullion Market Association, indicating central banks' unwillingness to lend gold to financial institutions on worries that they might not be able to return gold.
Gold's losses came amid plunges in global stock markets. Stock in Europe and Asia recorded sharp losses overnight, while U.S. stocks also tumbled Thursday after Wednesday's big slump. See Market Snapshot.
"Investors worldwide are selling everything, including the kitchen sink, and gold is no exception," said Peter Grandich, chief commentator at Agoracom, an online marketplace for the small-cap investment community.
On gold exchange-traded funds, assets in the SPDR Gold Trust, the largest gold ETF, were unchanged at 767.58 tons Wednesday but down from Monday's record of 770.64 tons, according to the latest data from the fund.
The SPDR Gold Trust dropped 5.3% to $78.88 on the New York Stock Exchange.
Analysts had projected gold prices to rise as demand for the precious metal as a safe haven is expected to increase amid the financial turmoil, but gold has repeatedly defied their expectations and has closed lower in the previous five straight sessions.
"Nervousness was the main feature among participants," said Kitco's Nadler.
Key U.S. economic data released on Thursday showed retail-level inflation under wraps. See Economic Report.
Some analysts worried that in the long term, the global rescue plans to inject liquidity into the market will stir inflation -- something that would be a bullish sign for gold prices as investors tend to buy the metal as a hedge against rising prices.
In other metals action, December silver dropped 4.8% to $9.69 an ounce.
Copper for December delivery dropped 4% to $2.1230 a pound. January platinum tumbled 8.6% to $891 an ounce, and December palladium plunged 13% $170.55 an ounce.
In spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $834.50 an ounce Thursday morning local time, down $12.50 from Wednesday afternoon.
On the equities side, The Amex Gold Bugs Index fell 9.6% to 209.23 points. IShares Gold Trust slid 5.5% to $78.96, while the iShares Silver Trust ETF fell 7.4% to $9.50.
The Market Vectors-Gold Miners ETF dropped 8.1% to $22.40.
