ET:Gold falls $200 from record high as investors cash in scorching gains
LONDON: Gold extended losses on Thursday to fall as much as $200 from Tuesday's record high, as investors favoured assets seen as higher risk and after the CME Group hiked trading margins for the precious metal for a second time this month.
Investors have cashed in scorching gains in the metal ahead of a widely awaited central bankers' meeting at Jackson Hole, Wyoming, as speculation grows over whether or not the Federal Reserve will signal a further round of U.S. monetary easing.
More quantitative easing -- or money printing -- for the Fed could significantly lift gold, but it could have further to correct if no additional action is signalled.
Spot gold was down 2.5 per cent at $1,707.09 an ounce at 1004 GMT, having earlier touched a low of $1,702.44.
Investors lost faith in gold's latest rally after the yellow metal surged nearly 20 per cent in early August to record highs at $1,911.46 an ounce.
"In a sense the decline is just subtracting the frothy increase (from the market)," said Mitsubishi analyst Matthew Turner. "That has been going on since around $1,600 an ounce, so it is hard to see where the bottom lies."
"To be convinced you'd seen the top of the market you would have to see more signs of the issues that had lifted gold being resolved, such as the euro zone crisis, and U.S. growth coming back."
Spot prices fell 4.3 per cent on Wednesday, their biggest one-day drop since December 2008, after U.S. durable goods data beat expectations. U.S. gold futures also posted their sharpest slide since 1980.
Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust , declined by more than 27 tonnes on Wednesday, their biggest one-day outflow since Jan. 25. They have dropped nearly 60 tonnes this week, worth around $3.25 billion at today's prices.
Gold's losses were exacerbated late on Wednesday after the CME Group raised margins on gold futures by about 27 per cent, the biggest hike in more than two and a half years and the second increase in a month.
Assets seen as cyclical or higher-risk than gold rose on Thursday as gold declined. European shares climbed after a raft of positive corporate results, oil prices firmed and the euro strengthened against the dollar. U.S. gold futures for August delivery were down $47.50 an ounce at $1,409.80.
