Gold tumbled below $1,400 an ounce, falling the most since 1980, after dropping into a bear market last week as optimism that a U.S. recovery will curb the need for stimulus cut demand for a protection of wealth. Silver, platinum and palladium tumbled.
Holdings in the SPDR Gold Trust, the biggest exchange- traded product backed by the precious metal, are the lowest in almost three years and hedge funds have cut bets on higher prices by 72 percent since mid-October. Futures slid 4.1 percent on April 12, taking losses to more than 20 percent since the record close in August 2011, and meeting the common definition of a bear market.
The metal climbed for a 12th year in 2012 as nations pledged more stimulus to bolster growth. Prices are down 18 percent this year as some Federal Reserve policy makers favor pulling back this year on $85 billion in monthly debt-buying and as U.S. equities reached a record. The turn in the gold cycle is quickening and investors should sell, Goldman Sachs Group Inc. said April 10. Prices also fell last week on speculation Cyprus may sell gold. Commodities declined to the lowest since July as data showed China’s economy grew less than estimated.
“We could see a severe correction in gold, even spilling over into silver and the platinum metals group,” Peter Sorrentino, who helps manage about $14.7 billion of assets at Huntington Asset Advisors in Cincinnati, said in an e-mail. “I reduced our holding some weeks back, and regret now not selling more.”
Gold futures for June delivery slumped 9 percent to $1,366.90 an ounce at 10:54 a.m. on the Comex in New York, heading for the biggest drop since March 17, 1980. Prices touched $1,356.60, the lowest since February 2011.
A put option on gold, giving the owners the right to sell May futures at $1,300, soared 75-fold to $22.50, the highest since September.
Futures trading was four times the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
Prices may drop to $1,310 by June, Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Global Markets Inc., said today.
An April 9 debt assessment by the European Commission said Cyprus had committed to selling about 400 million euros ($525 million) of “excess” gold reserves. In response to the disclosure, the Central Bank of Cyprus said it wasn’t considering a sale. It owns 13.9 metric tons, according to the World Gold Council. That’s valued at about $622 million.