Dubai: International spot gold slumped to its lowest level in five years in Asian trade on Monday as Chinese traders sold off the metal.
International spot gold traded at $1,113.03 an ounce at 5 pm local time, after falling to a low of $1,088.05 in Asian hours of trade.
“Sentiment is and has been very weak for the past few weeks. Some momentum and technical traders took advantage of this and crashed it below $1,100 in Asia. Some of the weakness may be due to disappointment that Chinese gold purchase was not bigger than what was announced on Friday,” said Ole Hansen, head of commodities strategy at Saxo Bank.
On the Shanghai Gold Exchange, more than 3 million contracts got traded on Monday compared to an average of 30,000 contracts. This comes after China said its gold reserves have risen by almost 60 per cent over the past six years to be at 1,658 tonnes as of the end of June.
To add to the woes, dollar, which strengthened to its highest level in three years, also weighed on the alternative metal.
“Furthermore the renewed dollar strength and speculation about the timing of the first rate hike and the recent lack of gold response to the Greek and Chinese stock market crisis gave little incentives to be long,” Hansen said.
Federal Reserve Chair Janet Yellen confirmed on Wednesday the central bank would likely raise interest rates this year if the US economy expands as expected.
