Gold plunged to a 33-month low as U.S. economic data beat estimates, strengthening the case for reduced stimulus from the Federal Reserve as the dollar climbed. Silver sank to the lowest since August 2010.
Cash bullion dropped as much as 2.6 percent to $1,244 an ounce, the lowest level since Sept. 13, 2010, and was at $1,248.75 at 2:50 p.m. in Singapore. It’s lost 22 percent since the start of April, heading for its biggest quarterly loss since at least 1920, according to data compiled by Bloomberg. Silver retreated as much as 4.5 percent to $18.763 an ounce.
Gold has slumped into a bear market after 12 annual gains on concern that reduced stimulus from the Fed will erode haven demand. Bullion’s decline has shattered the confidence of those people who thought prices would climb indefinitely, according to Credit Suisse Group AG. Investors have sold bullion from exchange-traded products at a record pace this year.
“The raft of figures that came out of the U.S. all pointed to a stronger growth pattern, which pushed the U.S. dollar higher,”David Lennox, an analyst at Fat Prophets, said from Sydney. “That’s two nails in the coffin for gold: a stronger U.S. dollar and expectations that quantitative easing will be scaled back.”
Fed Chairman Ben S. Bernanke said this month that the U.S. central bank, which buys $85 billion of Treasury and mortgage debt a month, may trim purchases this year and end the program in 2014 should the economy continue to improve. U.S. durable goods orders rose more than forecast in May, while consumer confidence for June exceeded projections, data showed yesterday.
Gold has fallen 25 percent in 2013, heading for the biggest annual decline in more than three decades, as the BloombergU.S. Dollar Index (BBDXY) climbed 5 percent. The gauge, representing 10 major currencies weighted by liquidity and trade flows, gained as much as 0.2 percent before a report that will probably confirm U.S. economic growth accelerated in the first quarter.
Paul Singer’s Elliott Management Corp. and Schroder Investment Management Ltd.’s Christopher Wyke are among investors sticking with their bullish views. Wyke predicted this week that prices will reach a new high as investors seek insurance against economic and political risk, while Elliott said in April that bullion remains the best store of value.
Gold rallied for 12 years through 2012 as the Fed cut borrowing costs to a record to bolster the largest economy. Analysts from Morgan Stanley to Credit Suisse and Goldman Sachs Group Inc. trimmed gold forecasts this week, with Morgan Stanley saying that the Fed’s statement on the possible withdrawal of stimulus represented a potential game changer for bullion.
Assets in the SPDR Gold Trust, the largest bullion-backed ETP, have declined 28 percent this year, erasing $34 billion from the value of the fund. U.S. government filings in May showed billionaire investor George Soros joined funds run by Northern Trust Corp. and BlackRock Inc. in cutting holdings in the SPDR in the first quarter. John Paulson, the biggest investor, kept his stake of 21.8 million shares.
The number of hedge funds investing in gold globally shrank to 290 in May, the lowest level since 2010, from 310 in December, with their assets slumping on losses and redemptions, according to EurekaHedge Pte Ltd., a Singapore-based fund-research company.
Cash silver traded at $18.89 an ounce, 34 percent lower this quarter, set for the biggest such drop since the three months to March 1980. The metal is the worst performer this year on the Standard & Poor GSCI Spot Index of raw materials.
Spot platinum fell as much as 2.4 percent to $1,318.65 an ounce, the lowest since November 2009, before trading at $1,323.55. Palladium dropped 1.6 percent to $655.10 an ounce.