Wall Street News
Gold falls lowest since December 2008.
Gold plunged in New York, heading for the biggest drop in 18 months, on speculation that financial markets may be stabilizing, eroding the appeal of the precious metal as a haven.
Bullion has tumbled more than 5 percent in two days, erasing gains in the past two weeks that sent the metal up as much as 16 percent since Aug. 5 to a record $1,917.90 an ounce yesterday. On Aug. 16,Wells Fargo & Co. said rising speculative demand from investors had pushed the market into a “bubble that is poised to burst.”
Gold futures for December delivery plunged $72.30, or 3.9 percent, to $1,789 an ounce at 12:11 p.m. on the Comex in New York. A close at that level would be the biggest loss since Feb. 4, 2010.
The dollar rose against a basket of six major currencies amid speculation about whether Federal Reserve Chairman Ben S. Bernanke will say this week that the central bank is willing to provide more stimulus to the economy. Central bankers meet this week in Jackson Hole, Wyoming, to address the U.S. recovery. Gold gained 31 percent this year through yesterday as burgeoning global debt crises and turmoil in equity markets boosted the appeal of the metal as an alternative asset.
In the second quarter, George Soros and Eric Mindich cut their holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal. Paulson & Co., the U.S. hedge fund run by John Paulson, maintained its position of 31.5 million shares, the biggest stake in the ETF.
“Gold got pushed up on the idea that Bernanke will announce further quantitative easing,” Patricia Mohr, a commodity market specialist at Scotia Capital, said in a telephone interview. “Now people are not so sure whether that will happen and that is creating disappointment in the gold market.”
Earlier reports had connected the surge in gold to hedge funds who were selling gold to cushion profit loss. Soros’ exit frmo the market was a strong indicator for analysts expected the drop two weeks ago however analysts have increased their future gold prices to surpass $2000 in early 2012.
Now, all eyes on the Fed.