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Gold price sinks to more than 5-year low

LONDON: Gold slumped yesterday to the lowest point in nearly five and a half years, weighed down by reports of massive selling in China, dealers said. The precious metal tumbled to $1,072.35 in Asian deals, striking the lowest point since February 11, 2010, and breaching the key psychological barrier of $1,100. “The price slide was triggered by high selling volumes on the gold exchange in Shanghai,” said Commerzbank analysts in a research note to clients. Dealer Nick Rose, at trading firm TradeNext, agreed that the latest price slump was sparked by Chinese sellers offloading large quantities of the metal. Gold had already slid on Friday on the back of the strong dollar, which soared last week after US Federal Reserve chief Janet Yellen reaffirmed expectations of an interest rate hike by year-end.

A stronger greenback makes dollar-denominated commodities more expensive for buyers using weaker currencies. That tends to dent demand and, in turn, pull prices lower. Prices were hit Friday by news that China’s official gold reserves rose almost 60 percent over the past six years, according to the first official data on the subject since 2009. The central People’s Bank of China (PBoC) said bullion holdings rose 57 percent to 1,658 tons as of the end of June, from 1,054 tons in April 2009, the last time a figure was released. “Markets have commenced the week with an unexpected start following a spectacular drop in gold during the Asian session that sent the yellow metal to a new milestone five-year low,” added analyst Jameel Ahmad at traders FXTM yesterday. “Gold dropping so sharply is a surprise and while the reports that China gold reserves were half the expected level might have inspired additional selling pressure, it is the repeated comments of commitment from the Federal Reserve that they will begin raising US interest rates at some point this year that have continuously pressured gold in recent months.” Other precious metals also forged multi-year lows yesterday. Silver dived to $14.54 per ounce, the lowest level in nearly six years.

Platinum sank to a six-year trough at $946.25 an ounce, while sister metal palladium slid to $603.95 per ounce-last witnessed on November 11, 2012. China had foreign currency reserves of $3.69 trillion as of the end of June, the world’s largest trove. The PBoC announces those figures on a quarterly basis. The gold reserve figure-announced late Friday-comes as China works to internationalize its tightly controlled yuan currency.

Beijing is also seeking to have the yuan included in the basket that makes up the IMF’s “special drawing rights” reserve currency. The central bank said it would adjust its gold holdings according to its reserves and investment needs. Zhang Qi, an analyst at Haitong Securities, told AFP on Monday China’s gold to foreign currency reserve ratio remained much lower than other countries, adding: “The internationalization of the renminbi is irreversible.” —Agencies

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This article was published on 21/07/2015