Gold plunged in New York, heading for the biggest drop in 18 months, on speculation that financial markets may be stabilizing, eroding the appeal of the precious metal a haven. Bullion has tumbled more than 5 percent in two days, erasing gains in the past two weeks that sent the metal up as much as 16 percent since Aug. 5 to a record $1,917.90 an ounce yesterday. On Aug. 16, Wells Fargo & Co. said climbing speculative demand from investors had pushed the market into a “bubble that is poised to burst.”
U.S. equities climbed today after a Commerce Department report showed orders for U.S. durable goods climbed more than forecast in July as a surge in demand for aircraft and autos eclipsed a decrease in business equipment. Federal Reserve Chairman Ben S. Bernanke and other central bankers meet this week in Jackson Hole, Wyoming, to address the U.S. recovery.
“This is liquidation from a crowded trade,” Adam Klopfenstein, a senior market strategist at MF Global Holdings Ltd. in Chicago, said in a telephone interview. “Investors are paring down positions in gold on expectations Bernanke will do something to boost equity prices.”
Gold futures for December delivery plunged $76.10, or 4.1 percent, to $1,785.20 an ounce at 10:58 a.m. on the Comex in New York. A close at that level would be the biggest loss since Feb. 4, 2010.
“This is just pure panic selling,” Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago, said in a telephone interview. Before today, gold’s 14-day relative strength had been above 70 since Aug. 8, a signal to technical traders that prices are poised to fall.
Before today, gold gained 31 percent this year as burgeoning global debt crises and turmoil in equity markets boosted the appeal of the metal as an alternative asset.
“Europe is on vacation and the sovereign-debt fears are being addressed,” Frank Lesh, a trader at FuturePath Trading, said in a telephone interview from Chicago. “The currency markets are pretty stable and not scaring anybody at the moment.”
