Rising dollar pushes gold to 5-year low in heavy sell-off
20 Jul 2015
Gold prices plummeted, losing 4 per cent in one day to hit their lowest in more than five years on Monday while platinum sank 5 per cent to its weakest since 2009 as investors sold the precious metals on the face of rising US dollar.
Prices of most precious metals, including gold and platinum, breached critical support levels as the dollar strengthened on growing expectations that the US Federal Reserve would hike interest rates this year.
Gold's 4 per cent slide in a matter of minutes on Monday came after a record 3.3 million lots of the metal, or about 33 tonnes, were traded on a key Shanghai physical contract, as top consumer China appears to be increasingly shunning bullion.
Nearly 900,000 lots were traded on a key contract on the Shanghai Gold Exchange, compared to less than 27,000 lots on Friday, Reuters data showed. Prior to Monday, volume for July had averaged less than 30,000 lots.
Chinese investors now have less reason to hold on to gold as its international prices have plummeted with rising dollar value.
China said on Friday its gold reserves were up 57 per cent at the end of June from the last time it adjusted its reserve figures six years ago.
Despite the increase, gold now accounts for 1.65 per cent of China's total foreign exchange reserves, against 1.8 per cent in June 2009.
Spot gold XAU fell to as low as $1,088.05 an ounce - its weakest since March 2010 - shortly after the Shanghai Gold Exchange opened. Gold regained some ground as the selloff subsided, trading above the key $1,100 support level.
Spot gold was down 2.4 per cent at $1,106.90 an ounce by 0302 GMT after falling as far as $1,088.05, its lowest since March 2010. Platinum lost as much as 5 per cent to $942.49 an ounce, its weakest since February 2009. Palladium dropped as much as 3.4 per cent to its lowest since October 2012.
Dollar will continue to rise on the strength of a Congressional statement by Federal Reserve chief Janet Yellen last week that the Fed is on course to raise interest rates by September.
