Gold drops to new 20-year low

LONDON, JULY 15: Gold edged to fresh 20-year lows during early European business on Thursday amid light volumes and widespread market cau...

LONDON, JULY 15: Gold edged to fresh 20-year lows during early European business on Thursday amid light volumes and widespread market caution on price direction, dealers said.

London gold fixed at $ 253.75 a troy ounce in the morning, down from the previous afternoon’s $ 255.25 and marking a new low since May 15, 1979. Spot gold has plumbed a series of 20-year lows since Britain’s July 6 auction of 25 tonnes, the launch of a plan to sell 415 tonnes of reserve gold in exchange for increased holdings of dollars, euros and yen.

Dealer reports of strengthening Middle East and Asian demand had failed to quell bearish sentiment created by known plans for reserve sales by Britain, the International Monetary Fund and Switzerland. “The market is very short and approaching fresh lows. People were offering relatively small amounts and got relatively good responses but it still went lower,” said one London dealer.

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“People are holding back a bit, with some thinking there will be a rally to the upside near $ 256.00/ $ 257.00,” he said, adding that any such move would likely come with US trade.

Implied one-month lease rates for gold remained high at 3.03 per cent on Thursday, off their peak near 3.90 per cent earlier in the week but well above the 0.50 per cent level prevailing before Britain announced its sales programme in early May.

On the technical front, gold looked weak. “I am not in the very bearish camp which is talking about sub $ 200.00 levels — I don’t think we are going that far,” said chartist, Cliff Green, with UK-based independents Trend Analysis. “I can see moves towards $ 235.00 initially heading towards $ 250.00. Any recovery from here will be corrective,” he said.

Spot gold was last at $ 253.60/ $ 254.00, 40 cents below Wednesday’s US close while silver was three cents down at $ 5.04/ $ 5.07. Platinum was unchanged at $347.00/$349.00 and palladium was at $ 338.00/ $ 343.00, down $ 5.00 but off overnight lows.