The Gold Plummets, Lowest Since 2010

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Six years long traders and investors trying to calculate how much gold China possess. The announced results on Friday however were disappointing.

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Closing price of XAUUSD, 17-July-2015

China had bullion assets to about 1,658 metric tons, less than brokers at HotForex Ltd. and Sharps Pixley Ltd. predicted. The gold futures plummeted to the lowest levels since 2010 on Friday and it supposed to drop further if the U.S. economic outlook strengthens further.

Since the U.S. investors shun the precious metal, the traders put most of their hope in China’s buyers  that their soon start buying up gold and the market turns to bullish. Together with India, China is the biggest gold consumer and producer. The sell off has disastrous impact on miners as well: this Friday the Barrick Gold Corp. shares dropped to lowest since 1991.

“I’m shocked by how small the figure is,” commented on China’s gold reserves Ross Norman, chief executive officer of broker Sharps Pixley by telephone from Mayfair, London. “I don’t think I was alone in thinking they have accumulated three times as much.”

Gold futures for August delivery dropped 1 percent to settle at $1,131.90 an ounce at 1:49 p.m. on the Comex in New York, after touching $1,129.60, the lowest since April 2010.

The reserve values “were disappointing in some aspects and reflected that China isn’t adding gold as much as people thought it was,” John Knobel, commodity analyst at HotForex broker, said in a telephone conversation. “It begs the question of what’s been happening to the gold produced that hasn’t been taken by the central bank.”

Downtrend

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Bears in charge in the gold futures markets

Prices dropped further after a government report pointed out new-home building permits in the United States
jumped in June to the second-highest level since 2007. The gold price downtrend continued when Federal Reserve Chairwoman Janet Yellen has signaled that the central bank will raise interest rates this year due to the healthy shape of economy.

The precious metals have been considered safe havens in case of economic crisis but recently lost their attraction because they don’t pay interest or offer returns like other financial assets such as equities and bonds. New York gold futures fell for seven consecutive trading days, longest price drop session since last year November.

The Barrick Gold shares, the leading producer of the precious metal, plunged 6.5 percent in Toronto. The Philadelphia Stock Exchange Gold and Silver Index, indicator of miners, fell 4.4 percent, reaching the lowest since January 2002.

“There is just no interest in the market to own gold,” explained Donald Selkin, the chief market strategist at National Securities Corp. “The Fed’s hawkish stance is the biggest culprit for the decline that we are seeing in the precious-metals market.”

The silver followed the gold’s path and fell 1 percent to $14.834 an ounce, that is a fifth straight price drop session.

Platinum futures for October also dropped 1 percent to $1,001.30 an ounce on the New York Mercantile Exchange. Earlier, the prices went under $1000, the first time since February 2009. Palladium futures for September shipment decreased 2 percent to $619 an ounce.