Gold price is getting crushed
On Tuesday gold crashed through the $1,300 an ounce level to its lowest since June as heavy selling hit December futures trading on the Comex market in New York.
In early trade the metal exchanged hands at $1,283.60 an ounce, down nearly $30 an ounce or more than 2%, as several massive selling orders were executed. Volume of lots traded were already close to the daily average in early morning dealings.
Gold touched a two-year high in July around $1,380 an ounce and year to date the metal is still managing gains of 20% or $220 an ounce, one of its best annual performances since 1980.
Saxo Bank’s head of commodity strategy Ole Hansen, says while the Danish bank maintains a constructive longer-term view on gold, following the drop today "the main question remains whether this is just a correction or something larger":
The gold market, it must be noted, hates the uncertainty surrounding the Federal Open Market Committee's rate hike intentions. Following better-than-expected economic data from the US this past week, the chances of a December hike continue to rise.
The negative bond yield environment, the US presidential election, and very low US real rates are likely to attract continued demand for gold – but not before we get a sense of how deep this correction is going to be. A quick jump and close back above $1,300/oz could be the first indication that pent-up demand has been triggered and this should help stabilise the market.