Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold plunged 2.2% to close under $1,107 after a Chinese seller dumped 33 tonnes on the Shanghai market, creating a technical sell-off in global markets.

Due to holiday market closures in Japan and other Asian counties, a lack of liquidity on the Shanghai Gold Exchange helped to accelerated price-weakness after a contract of 3.3 million lots was sold, triggering a wave of automatic stop-loss orders that pushed the gold price to a new five-year low.

The negative sentiment was caused in part by Friday's publication of official China's gold reserves, which came in far less than expected. The PBOC acknowledged holding 1,658 tonnes, representing a 57% increase over the last time the total was published, in 2009. Most analysts believed the number to be at least 3,000 tonnes. While many remain skeptical of the published amount, it nonetheless cast a bearish pall on speculative demand.

Gold has now fallen for eight consecutive sessions because of several key factors. The seeming diffusion of Greece's debt crisis has reduced European demand for safe havens. Last week's nuclear agreement between the West and Iran promises to allow new supplies of oil to enter the market, driving down prices for crude and cutting in to demand for inflation hedges. And expectations that the Fed will raise interest rates this year have helped to strengthen the dollar, which weighs on gold and other commodities denominated in it for international trade by making them more expensive to foreign buyers.

The other precious metals were also weaker. Silver dropped 0.5% while platinum and palladium fell 1.3% and 1.1%, respectively.

At the Comex close: August gold plunged $25.10 to $1,106.80; September silver lost nearly 8 cents to $14.76; October platinum slid $12.70 $988.60; and September palladium fell $6.95 to $612.05 an ounce.