Gold prices shed more than 2 percent on Tuesday, on track for their biggest three-day loss in nearly a year, as fears over Ireland's fiscal health sent the dollar rallying against the euro, sparking a cross-asset sell-off. While gold often benefits as a risk-aversion strategy, investors sometimes liquidate positions to cover losses elsewhere in their portfolios.
Gold's drop was similar to a rout on Friday, when it suffered its biggest fall in four months, as precious metals were caught up in near indiscriminate selling across the commodity spectrum rather than suffering from any bullion-specific bearishness.
"There is across-the-board, margin-call type liquidation going on. Investors hit by margin calls know that they can always get liquidity from the gold market to raise capital," said Dennis Gartman, publisher of the investment newsletter The Gartman Letter. Spot gold fell 2 percent to $1,333.40 an ounce at 12:39 p.m. EST (1739 GMT), having earlier set a two-week low at $1,329.45. Bullion has lost more than 5 percent in the past three sessions, its biggest loss since early December.
US December gold futures fell 2.6 percent to $1,333.10 an ounce in heavy volume. "Gold is a risk asset. We saw that post-Lehman Brothers, when everyone thought gold would benefit and it sold off," said Credit Agricole analyst Robin Bhar.
Billionaire investor Soros may be cutting back on his gold bets, but he says the precious metal still has some kick to it, as long as conditions like low interest rates prevail. "The conditions for gold are pretty perfect," he said during a speech in Toronto. "The big negative is that too many people know this and a lot of hedge funds are very exposed ... Gold has a tendency to go parabolic," he added, noting its tendency to fall as quickly as it rises.
Spot silver dropped 1.2 percent to $25.12 an ounce. Platinum and palladium were both down sharply on the day, in line with other metals, ignoring a bullish outlook for the market next year from refiner Johnson Matthey, which said improving supply and demand fundamentals should bring both markets broadly into balance next year. Platinum fell 1.9 percent to $1,636.74 an ounce. Palladium was down 4.5 percent at $639.47, in its third successive daily decline.
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