Gold, silver collapse amid broad-based selloff

Gold futures traded at the lowest price since mid-June after bullish investors ran into a multi-month high dollar, which resulted in a broad drawdown in the precious metals complex.

Gold for December settlement on the Comex division of the New York Mercantile Exchange tumbled $39.90 or three percent to $1,272.80 per ounce – the lowest point since June 23.

After recent US manufacturing data showed the August slowdown was only temporary, investors reignited a quiet foreign exchange market with the dollar index earlier hitting 96.44, its strongest since August 9.

“If it does not snap back, we could see more long liquidation in gold – a drop to $1,275-1,250 could follow. We should now get fresh insight into how bullish underlying sentiment is or isn’t,” FastMarkets’ William Adams said. “The dip may well, however, give pent-up physical buyers an opportunity to restock.”

Investors believe the manufacturing rebound will allow the Federal Reserve to lift interest rates in December, with nearly 60 percent expecting at least one rate increase before the year concludes.

With no October meeting and the November convention days before the presidential election, December is seen as the last chance that the central bank has to rekindle the process of rate normalisation.

“In the short term, we expect gold prices to remain under selling pressure,” Andy Farida, FastMarket’s analyst, said. “But we remain friendly towards gold – our medium-to-long-term view remains bullish and we could see the metal seeking a strong technical support to rebound into.”

The economic agenda was sparse today, with the EU PPI at -0.2 percent, missing expectations of a reading of 0. A swathe of US and European data is scheduled for release tomorrow, including final services PMIs from six separate countries.

Meanwhile in US markets, the Dow Jones industrial average and S&P both declined 0.6 percent, while the dollar gained 0.1 percent to $1.1200 against the euro.

As for other commodities, Comex silver for December settlement collapsed 98.3 cents or 5.2 percent to $17.885 per ounce. Trade ranged from $17.745 to $18.940.

Platinum for January delivery declined $18.40 or 1.8 percent to $990.70 per ounce, while the most active palladium contract was last trading at $699.15 per ounce, down $12.65.

(Editing by Tom Jennemann)

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