Gold has fallen about 20 percent so far this year after an unbroken 12 years of gains and is some 28 percent down from the record high hit in September 2011 at $1,920.30. “We have had technical barriers broken in the past two days, while the overall macro environment has being moving away from the inflation bias … and some institutional investors are rethinking their positions in commodities in general and gold specifically,” Deutsche Bank analyst Daniel Brebner said. Spot gold, lost 8.5 percent on Monday and dropped further to $1,321.35 an ounce, its lowest since January 2011, earlier on Tuesday.
It later reversed direction, spurred by physical buying and helped by a weaker dollar against the euro, to briefly rally above $1,400 to a session high of $1,401.24 an ounce, up 3.6 percent. By 1446 GMT it was up 2 percent or $27.05 at $1,379.80. “We still believe that the price has further to fall – the fundamental (non-speculative) value of gold is still a fraction of the current price,” Alan Miller, CIO of SCM Private, an investment management firm said in a note.
US gold futures for June delivery fell more than 2 percent to the weakest in more than two years before rebounding 1.6 percent to $1,381.20 an ounce. Monday’s drop in spot gold, closing down around $125 an ounce, eclipsed the rout on January 22, 1980, a day after gold hit its then-record $850 on global panic over oil-led inflation due to Soviet intervention in Afghanistan and the Iranian revolution.
Reuters market analyst for commodities and energy technicals, Wang Tao, expects gold to fall further to $1,245 per ounce. Platinum and palladium, which have also been hammered by heavy selling, regained strength after Japanese shares pared losses due to renewed weakness in the yen. Spot platinum was up 2.7 percent to $1,439.99 an ounce and palladium rose 4 percent to $678.50. Silver also rallied 3.9 percent to $23.46 after dropping 12.6 percent on Monday.