Home Breaking News Gold price set for worst 2-day loss in 30 years

Gold price set for worst 2-day loss in 30 years

Reuters / Michael Buholzer
Reuters / Michael Buholzer

Gold is headed for its biggest two-day drop in 30 years being below $1,400 per ounce for the first time since March 2011 in the wake of underwhelming Chinese growth data.

Spot gold dropped as low as 6.3 percent to below $1,384.69 an ounce, dropping more than $30 in a matter of minutes at one point.

The latest slide came after China’s annual economic growth rate fell unexpectedly to 7.7 percent in the first quarter putting weight on the markets. The growth was lower than market expectations for an 8.0 percent expansion, frustrating investor hopes and raising doubts about the global economy.

Slowing growth signifies that inflation looks less of a threat, reducing gold’s appeal as a store of wealth if prices are rising.

However, the US Federal Reserve is now less inclined to proceed with more quantitative easing (QE) as the economy recovers.

“What we now see is panic selling, perhaps triggered by the Fed’s stimulus view. The Fed has given the signal that there’s a possibility to reduce QE, and that took a lot of trust out of gold,” said Dominic Schnider, an analyst at UBS Wealth Management, as cited by Reuters.

“As the Fed becomes less reflationary and the ECB not willing to end its deflationary policy, the balance towards inflation is shifting dramatically. And people recognize that in an environment where you have no inflation is a powerful driver to get out of the metal.”

Gold was already suffering from a variety of factors, including a proposal Cyprussell its gold reserves to pay back debts.

Investors ditched gold along with other precious metals. Silver was down 10 percent to $23.27 an ounce, having fallen to its lowest since October 2010 at $22.97. Spot palladium dropped 6 percent to its lowest since the begging of January at $665.75 and was then seen at $678.72, down 4.1 percent. Spot platinum was down 3 percent at $1,439.99 an ounce.

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