Meanwhile, Australia-based miner Newcrest said gold output was up 6% year-on-year, despite the falling price, with gold production around 674,000oz in the three months to June.
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After the success of QE1, QE2 and QE3 followed in successive years, and the flush of liquidity in the market boosted gold prices once again and the prices touched record high of $1,921.17 an ounce in 2011.
Dollar came under a lot of pressure at that time as the US Federal Reserve started aggressive interest rate cuts in 2001 and 2002 in response to the post-dotcom-bubble recession and September 11 attacks, along with rising federal budget and trade deficits.
This in turn heightens the likelihood of people holding gold as the metal is providing little to no yield, causing a price decline.
In non-dollar terms, gold has largely increased over the past year.
“Gold is navigating very unsafe waters, where an unexpected sharp drop to levels significantly below $US1,000 an ounce is possible”, Bart Melek, head of commodities strategy at TD Securities, said.
This was echoed by Victor Thianpiriya from ANZ, who expects the value of the precious metal will continue to fall. The probability of raising interest rates minimizes the attraction to invest in gold, not giving benefits from interest rates and, at the same time, fostering appreciation of the dollar.
A report suggests that, at these price levels, approximately 10% of gold mines will soon be in loss-making territory. “The bounce in gold is nothing but a technical trade, as most major momentum indicators are showing that the recent sell-off is overdone”.
Copper prices briefly hit a two-week low on Thursday, before bouncing higher, as gold rebounded from Wednesday’s heavy losses.
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Still, gold prices pulled back from the day’s highs after U.S. jobless claims fell to their lowest level since 1973. Over the last one year, while the rise in stock markets resulted into incremental fund flows by retail investors into equities, the demand for the yellow metal was on a decline and even the gold exchange traded funds run by mutual funds witnessed net outflows from their schemes. Speculators anticipate that higher borrowing cost will make the dollar stronger, but pressurize commodities, as they are priced in the US dollar. Earlier, spot prices touched their lowest since March 2010 at $1,087.04 an ounce. A reduction in the customs duty on gold seems to have helped bring down its price in the domestic market.
