Gold in free-fall as buyers flee

Gold crashed more than $100 (Dh367) on Friday as a slide turned into a free fall, with weeks of volatility, renewed strength in the dollar and talk of hedge fund liquidation wrecking its safe-haven status. The sell-off came even after relative calm was restored to the stock and oil markets following Thursday's losses. Bonds also dived with gold and silver as investors took profit on a near week-long rally in US Treasuries. Widespread talk of possible selling by big hedge funds covering losses in other markets set off one of the biggest routs on record in the precious metals group. The CME Group, which oversees trading in US gold and silver futures, responded by raising margins, or deposits, required on trades of the two precious metals as well as copper. The move would further squeeze the most optimistic investors in gold, who are trying to hold onto long positions or bets on higher prices. "We're making new lows and the bull case for gold is on pause for the near term," said Adam Klopfenstein, senior market strategist for precious metals at MF Global in Chicago. "In the near term, the flight-to-quality interest in owning gold is also out of the window as people are not interested in buying it even in the face of fears in the economy. Until it stabilises, I'm staying out of this market." Mounting fears last week of a global recession and a deepening Greek debt crisis made investors treat precious metals like any commodity, ignoring the safe-haven appeal that had made them a must-have in times of trouble. The spot price of gold, which tracks trades in bullion, saw its biggest plunge since the financial crisis in 2008. The plunge took out several key technical supports, including the 100-day moving average for the first time since February. By late Friday afternoon in New York, spot gold was down about 5 per cent, after falling more than 6 per cent earlier to touch lows from early August. US silver futures closed 18 per cent down, the biggest daily loss since 1987. Spot gold is down nearly 8 per cent over the last two days, while silver futures have lost nearly 25 per cent. Price swings Since hitting record highs above $1,900 in August, gold has seen extraordinary price swings as some investors, who piled into bullion, began to have second thoughts about it staying as a haven from the Eurozone turmoil and potential recession. The risk-off trade that had benefited gold abruptly disappeared over the past two weeks. The precious metal has begun trading inversely to a newly resilient dollar, as some investors bet the bullion had become overly inflated. In Friday's session, gold ignored even a dip in the US dollar index as the selling accelerated. "Gold's fall is a bit surprising. The fact that it has been so volatile lately is perhaps discouraging people from even buying the dips," said Peter Buchanan, senior economist at CIBC World Markets. By 5pm EDT (2100 GMT), bullion's spot price was down 5 per cent at around $1,643 an ounce, after trading between a session peak of $1,754.71 and low of $1,628.69. At $126 an ounce, the intraday move was the biggest on record in dollar terms. It was also more than 5 standard deviations beyond the normal one-day change. On a weekly basis, spot gold fell 9 per cent, its biggest weekly drop since 1980. US gold futures' benchmark December contract on Comex settled down 6 per cent, or more than $101, at under $1,640 an ounce. Spot silver was down 14 per cent at a seven-month low below $31 an ounce. Benchmark silver futures closed down nearly $6.50 at around $30.10 an ounce. Despite those steep losses, spot gold remained up 16 per cent year-to-date due in part to big gains in August. Silver futures, however, turned negative, posting a slight loss. While gold fell sharply last week, trading volumes have been strong but not yet near the record levels of August.