Gold continues its downward spiral to land at $1,550 an ounce

Yellow metal makes fresh 2012 lows, with analysts expecting more pain for the gold bull

Gold has all but lost its shine with the yellow metal plunging to $1,550 per ounce in early trade on Tuesday, a couple of sessions after witnessing its worst weekly drop this year.
Gold prices slumped $61.10 per ounce, or nearly 4 per cent, last week to close at $1,583.60 per ounce on Friday, May 11, compared with $1,644.70/oz that they closed at the previous week, on May 4, 2012.
Continuing the rout, gold is down more than $23.5 per ounce, or 1.50 per cent, yesterday to close at $1,560.60, and was trading lower by another $10 Tuesday morning, at $1,550.36 per ounce at 10am UAE time (6am GMT).
Locally, the retail price of 24ct gold in Dubai was fixed at Dh186 per gram Tuesday morning by the Dubai Gold and Jewellery Group, while 18ct gold can be bought for Dh142.50 per gram.
Gold has been on a downward spiral amid fears over a worsening European debt crisis and sharp losses in equities and commodities, and is trading at its 2012 low (of $1,560 per ounce, recorded on January 1, 2012).
Last Friday, the last trading day of the week, the metal came under heavy selling pressure after JP Morgan Chase & Co, an investment bank, revealed a $2bn trading loss, denting sentiment.
“Sentiment soured after JP Morgan announced $2bn in losses from its synthetic credit portfolio since the end of March,” wrote Standard Bank analyst marc Ground in his Friday’s commodities analysis daily.
“Added to this, reports that Spain was making a fourth attempt at a domestic bank rescue package and the ongoing political uncertainty in Greece, there was only one way for market to go – down,” he commented.
In addition, political and financial uncertainty in Europe, most prominently in Greece, France and Spain, kept traders’ confidence low and further squeezed precious metal prices.
Gold has now all bust lost its safe haven status, with the metal now plunging on political uncertainty whereas in the past, such worries would send punters scurrying towards the metal. Now, however, the US dollar is slowly but surely emerging as the go-to instrument for risk-averse investors.
With gold busting through its $1,578 support level, analysts aren’t too optimistic about the metal’s fortunes in the rest of the year, with most experts reckoning that it will soon fall through the next resistance level of $1,523.90, and fear that it could end up below $1,500 levels as well.
“All I’m saying is that, in my opinion, the gold price correction is not yet entirely completed. I see significant support around the $1,500/oz level, but it could drop even lower,” Marc Faber, nicknamed Dr Doom for his contrarian views expressed in the popular Gloom, Boom and Doom newsletter, said recently.
“We could have a big correction if global liquidity tightens or they stop printing money, Marc Faber said in March at the Middle East Investment summit in Dubai.