Wholesale prices to Buy Gold fell back to new 7-week lows in London trade Wednesday morning, unwinding Asia's 1% rally as global stock markets and commodity prices also fell after the US Federal Reserve kept its monetary policy unchanged on Tuesday.
Copper prices sank to a 2-week low, while US crude oil fell through $100 per barrel.
Silver Prices fell to their lowest point in 10 weeks, dropping through the $30-level first seen in November 2010.
Continuing its $400 billion "twist" of buying longer-dated US Treasury bonds, the Fed on Wednesday repeated its vow – first made in Dec. 2008 – to keep short-term US rates at "exceptionally low levels" for the foreseeable future, "at least through mid-2013".
The Euro currency today fell through $1.30 for the first time since January, buoying
the price for Eurozone investors wanting to Buy Gold above €40,200 per kilo.
Italy this morning had to pay a post-Euro record of 6.47% to borrow 5-year money, after German chancellor Merkel yesterday blocked any increase in the Eurozone's €500 billion "stability mechanism" fund.
"Some macro hedge funds are liquidating gold holdings and taking profits in a difficult year," says James Steel at bullion-bank HSBC.
"As trading volume typically drops toward year-end, we expect increasingly volatile price swings."
"We have the beginnings of a real bear market, and the death of a bull [in gold]," reckons Dennis Gartman, author of the eponymous $5,000-a-year investment letter, who began advising subscribers not to Buy Gold in August.
"So much damage has been done to the psychology of the market in the past week and so many late longs have been caught off guard that we think wholesale liquidation, and perhaps forced liquidation, shall be the outcome."
The volume of Gold Bullion held to back shares, however, in the New York-listed GLD exchange-traded trust was unchanged Tuesday, equal to $67.8 billion and keeping world ETF holdings near the all-time record set last week.
Over in Hong Kong this morning, "There is a lot of talk about 200-day moving average," said one dealer's note – "only 1-2% away from current Spot Gold."
"The Gold Price has not broken below this moving average since 2009," says a London dealer. "It is therefore a highly significant level of support, and a breach would be very bearish indeed."
Analysis by BullionVault this morning put the average Gold Price of the last 200 sessions at $1610.
Joining the price's low points since Lehman Brothers collapsed in late 2008, gold's uptrend now comes in just below at $1600 per ounce – "the level held repeatedly in the volatile Sept-Oct. period," says another wholesale dealer.
On the data front Wednesday, Eurozone industrial production showed a 0.1% drop in Oct. from Sept., defying analyst forecasts of a rise in the value of manufacturing, mining and utilities output.
UK unemployment held flat at 8.3% of the working-age population last month, but average wages for those in work grew just 2.0% from a year earlier. Consumer price inflation was 4.8%.
Money-supply growth in China – the world's fastest-growing major economy, and now the second largest consumer market for physical gold – showed a slight slowdown, with the M2 measure of currency in circulation and bank deposits rising 12.7% year-on-year, just below analyst forecasts.
"Consumers should look to buy the dips in gold," reckons a note from Standard Chartered bank, pointing to strong Asian demand to Buy Gold.
"Any [price] weakness is likely to be short-lived and problems in the global economy will be supportive over the medium term."
"As long as the Dollar is gaining, at least until the end of the year, gold will not be in the best position and will remain under pressure," says Nikos Kavalis, a commodities strategist at RBS in London, speaking to Reuters.
"The market is tending to want to see things from a cautious point of view. We are near the end of the year and no one wants to be particularly heroic."
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