Gold falls below $750 on dollar's surge; silver plummets
Gold fell below $750 an ounce, marking the longest slump in eight years, as the dollar's surge reduced demand for the precious metal as an alternative investment. Silver dropped to the lowest since June 2006.
Gold has tumbled 28 percent from a record in March as the dollar climbed 15 percent against the euro from an all-time low in July. The dollar today reached the highest in a year, and the Reuters/Jefferies CRB Index of 19 raw materials dropped to the lowest level since Jan. 24.
"This is indiscriminate slaughter across all commodities," said Ralph Preston, a futures analyst at Heritage West Futures Inc. in San Diego. "It's indisputable that the funds rushed in to pump up prices, and now they're rushing out. This is a phenomenal run for the dollar. We're shorting the metals."
Gold futures for December delivery fell $17, or 2.2 percent, to $745.50 an ounce on the Comex division of the New York Mercantile Exchange. The drop was the ninth straight, the longest slice since September 2000. Earlier, the price touched $739.80, the lowest for a most-active contract since Oct. 9.
Silver futures for December delivery fell 33.5 cents, or 3.1 percent, to $10.555 an ounce. Earlier, the price touched $10.21, the lowest since June 28, 2006.
Gold still has climbed 3.4 percent in the past year, while silver is down 18 percent.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has fallen 4.3 percent this week to 614.4 metric tons. The fund reached a record 705.9 tons on July 11.
Global Slowdown
Commodity indexes have fallen from records this year on concern that a global economic slowdown, triggered by the housing slump and the credit crisis in the U.S., will spread to other countries. Commodities are generally priced in the U.S. currency.
"It's certainly dollar-inspired liquidation for gold," said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. "The U.S. will be slow to recover, and inflationary pressure will remain low because of weak demand. The U.S. slowdown is spreading and beginning to impact emerging-market economies."
Gold, traditionally a haven from turmoil in financial markets, hasn't benefited from a plunge in equities, bank failures and rising geopolitical tension in the Middle East and Europe.
"The safe haven of choice is the dollar, not the metals," Preston of Heritage West said. "When it comes to the buck, it's going straight up. I wouldn't dare pick a top."
Gold, down 11 percent this year, is headed for the first annual decline in eight years. The record on March 17 was $1,033.90.