Gold fell sharply, losing three percent on Tuesday, as investors continued to take money out of commodities following a broad rally in the US dollar. The sell-off spilled over into other precious metals, with silver and platinum dropping to their lowest in a year, while palladium was battered to its weakest in nearly three years.
Gold fell to $776.80 an ounce, its weakest in three weeks. It was at $779.60/780.80 an ounce by 1430 GMT, down sharply from $802.25/803.60 an ounce late in New York on Monday. Prices are now very close to their low of the year at $773.90 on August 15 a long way from an all-time high of $1,030.80 struck in March.
"The dollar rose from around 1.4300 to around 1.4100 (against the euro) yesterday and is definitely not bullish for gold," said analyst Michael Widmer at Lehman Brothers. The dollar rose versus the euro on Tuesday, but broader gains were limited on mild profit-taking after a rally ignited by the government's bailout of mortgage firms Fannie Mae and Freddie Mac.
The US unit hit a one-year high against major currencies on Monday. Although physical buying had supported the gold market around $790 an ounce recently, that was overwhelmed on Tuesday as the selling picked up pace. "The sentiment is that it's going lower and that you can buy it cheaper tomorrow.
It looks very ugly at the moment," a senior trader said. John Reade, analyst with UBS Investment Bank, said in a research note that commodities may be falling out of flavour with investors for cyclical reasons. Traders said that last week's news of the closure of Ospraie Management LLC's flagship hedge fund, after it plunged 27 percent in August following losses in energy, mining and natural resources equity holdings, had also knocked investor sentiment in the asset class.
Spot platinum fell 6.6 percent to $1,248.00 an ounce and was last at $1,253.50/1,274.00 from $1,337.00/1,357.00 late in New York on Monday, when it tumbled nearly 4 percent. Prices are now at their lowest since the end of August 2007. Platinum group metals have been very badly affected by fears of a drop off in demand from car manufacturers. Autocatalysts, used to clean exhaust fumes, account for more than 50 percent of global demand.
China's passenger car sales fell in August from a year earlier, the first monthly decline in more than two years as a slowing economy and the Beijing Olympics kept would-be car buyers from showrooms. Palladium slid nearly eight percent to its lowest since November 2005 at $234.50 and was last at $237.00/235.00 from $258.00/266.00. Silver fell to $11.66/11.72 from $12.05/12.11, having hit a new low for the year of $11.52.
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