Gold slid for a fifth session in six on Wednesday, tumbling to a four-year low below $1,150 an ounce as a strong dollar kept investors away from the safe-haven asset and physical demand failed to provide underlying support.
Silver tracked gold lower, hitting its lowest since early 2010, while platinum and palladium also fell, Reuters reported.
The dollar rose to a seven-year high against the Japanese yen after a victory by Republicans in the United States' mid-term elections raised hopes for an end to political gridlock in Washington, boosting sentiment for riskier assets.
Underscoring the lack of interest in bullion, holdings in SPDR Gold Trust, the top gold-backed exchange traded fund, slumped to a fresh six-year low.
Physical buying of jewelry, coins and bars - which usually picks up at lower prices - has not emerged robustly enough to put a floor under prices.
"There is very little on the horizon that is bullish. Despite the trillions of dollars of stimulus over the past several years, most central bankers are worried about deflation, not inflation," said INTL FCStone analyst Edward Meir.
"In addition, the roaring US equity markets continue to siphon off assets away from alternative investments, including gold," he said.
The yellow metal is often seen as a hedge against inflation and financial uncertainties.
Spot gold tumbled to $1,146.06 an ounce, its lowest since April 2010, before recovering modestly to trade down 1.6 percent at $1,149.85 by 0738 GMT.
Silver fell more than 3 percent to $15.44, its lowest since February 2010.
Selling intensified after gold broke through $1,161 – the previous four-year low hit on Friday, and then $1,155, said a Hong Kong-based precious metals trader.
Mining Companies at Loss
The latest decline in the price of gold is saddling higher-cost producers with losses on every ounce mined, and pushing others to the brink of also slipping into the red.
Gold fell to a four-year low, below production costs for six of 19 mining companies tracked by Bloomberg Intelligence, including Harmony Gold Mining Co., South Africa’s third-largest producer, and Primero Mining Corp. (P) Three more producers are within $50 of the figure.
“What’s developing is almost a two-tier type of market,” said John Ing, chief executive officer at brokerage Maison Placements Canada Inc., speaking by phone. One tier has companies with good assets and lower costs, while the other comprises producers “who are saddled with high-cost operations” and stretched balance sheets.
The latest decline in the price of gold is saddling higher-cost producers with losses on every ounce mined, and pushing others to the brink of also slipping into the red.
Trading Volume
Futures trading volume was triple the average for the past 100 days for this time of day, data compiled by Bloomberg show.
Silver’s 30-week correlation coefficient to gold is at 0.87, with a reading of 1 signaling the two moved lockstep in the same direction. The link between gold and platinum is at 0.64, while gold and palladium’s correlation is at 0.27.
Holdings in gold-backed exchange-traded products fell 3.7 metric tons to 1,643.4 tons yesterday, the lowest since August 2009, data compiled by Bloomberg show.
Assets in the SPDR Gold Trust, the biggest ETP, are at the lowest since September 2008, when Lehman Brothers Holdings Inc. collapsed. The value of precious metals holdings has dropped to about $75.6 billion from $97.4 billion in March.
