Gold futures fell 2.5 percent on Wednesday on selling by hedge funds and a reallocation from commodities into a record breaking stock market rally. Traders braced for a further decline and precious metals remained on the ropes even when crude oil prices recovered from morning losses.
Investors chose stocks, bonds, and the sidelines, over gold, which was down 7.4 percent from a $612.40 peak on September 28. At the COMEX division of the New York Mercantile Exchange, gold for December delivery settled down $14.80 at $566.70 an ounce, having traded from a peak of $585.70 to $563.50 an ounce, the lowest price since June 14.
Investors shunned energy futures and metals this week to chase the Dow Jones Industrial stock average to a new record on Wednesday at 11,833, surpassing the old high set on January 14, 2000, before the stock market bubble burst.
"The market could easily target $550," said Mike Guido, commodities head of hedge fund marketing at Societe Generale. "The market is also struggling now with the strength in the Dow Jones. If the Dow does continue to move up through 12,000, you could have a reverse money flow through the balance of the year."
The market buzzed about liquidation by one or more commodity trading funds. Preplaced stop-loss sell orders were executed below $576.60/577, the previous low from mid-September, and again under $572, a floor source said. In the spot market, gold was quoted at $566.00/7.00, down from Tuesday's New York close at $576.50/577.50. London bullion dealers fixed Wednesday's afternoon spot reference price at $573.60 an ounce.