• Wednesday, May 22, 2024
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BusinessDay

Gold rises after drop to 2-year low

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 Gold rose 2.6 percent on Tuesday as the market tried to find its feet after the previous session’s record-breaking daily loss, but even as physical buyers seized on the lower prices investors feared more falls.

Bullion posted its biggest ever daily drop in dollar terms on Monday, catching gold bulls, speculators and veteran investors by surprise.

Reuters report Tuesday showed Gold has now fallen about 20 percent so far this year after an unbroken 12 years of gains and is some 28 percent down from the record high hit in September 2011 at $1,920.30. Spot gold dropped to $1,321.35 an ounce – its lowest since January 2011. It later reversed the losses with physical buying seen as the main influence to rally some 2.6 percent to $1,387.01 by 1028 GMT.

“I think everyone has to take a breath and it’s likely that we’ll see some rangebound trade. But there are people who still want to sell and they haven’t done so yet,” said David Govett, head of precious metals at Marex Spectron

The asset traditionally viewed as a safe-haven has been undermined by a proposed sale of Cypriot gold holdings and uncertainty over the U.S. Federal Reserve’s stimulus programme. It failed to capitalise on tensions in the Korean Peninsula even as Pyongyang made new threats of military action,

“We still believe that the price has further to fall – the fundamental (non-speculative) value of gold is still a fraction of the current price,” Alan Miller, CIO of SCM Private, an investment management firm said in a note.

“One thing I have learnt about markets is that they rarely trade at fair value and they tend to over-shoot (in both directions), so I really do not think you can estimate the amount of money “safely parked” in gold which can quickly head for the exit when people realise they have bought into the latest bubble,” he added.

U.S. gold futures for June delivery fell more than 2 percent to the weakest in more than two years before rebounding.