Gold posts modest recovery after sharpest tumble in 30 years
Zee Media Bureau
New Delhi: After a drop of over two-year low earlier in the session, gold price recovered one percent on Tuesday on low-level physical buying, but investors frustrated by the metal's lacklustre performance remained cautious amid fears of central bank sales and global growth.
Yellow metal posted its biggest ever daily drop in dollar terms in the previous session, catching many gold bulls and veteran investors by surprise. Gold has now fallen about 20 percent so far this year after an unbroken 12 years of gains.
The typically safe-haven asset has failed to capitalise on tensions in the Korean Peninsula even as Pyongyang made new threats of military action, and has been hit by uncertainty over the US Federal Reserve's stimulus programme.
Spot gold dropped to as low as USD 1,321.35 an ounce, but reversed losses to trade at USD 1,359.51, up USD 6.76, with dealers noting buying interest from consumers in Asia. The metal is about USD 560 below a lifetime high around USD 1,920 an ounce hit in September 2011.
US gold futures for June delivery fell more than 2 percent to the weakest in more than two years before rebounding slightly, while the most active bullion contract on the Tokyo Commodity Exchange sank as much as 10 percent.
Monday's drop of around USD 125 per ounce in cash gold eclipsed the rout on January 22, 1980, a day after gold hit its then-record USD 850 on global panic over oil-led inflation due to Soviet intervention in Afghanistan and the Iranian revolution.
Gold hit an 11-month high in October last year after the US Federal Reserve announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets would stoke inflation.
But the gain was erased by a rally in equities, talks the Fed could soon end its bullion-friendly bond buying programme, and concerns other indebted euro zone countries could follow Cyprus' plan to sell bullion reserves to raise cash.
Heavy outflows on global gold exchange-traded funds, which cut holdings to their lowest in more than a year, could also mark the end of a love affair between gold and investors.
With Agency Inputs
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