Dollar’s temporary “come-back” creates strong buying opportunity in gold.
Gold for June delivery tumbled $41.80, or 4.5%, to $879.70 an ounce on the New York Mercantile Exchange.
Other metals futures were also sharply lower, with platinum selling off 7%.
The Reuters-Jefferies CRB index, a benchmark barometer gauging the prices of major commodities, fell 1.7% to 380.47.
“Everything from cotton to copper and soybeans to silver is off sharply,” said Jon Nadler, senior analyst at Kitco Bullion Dealers. “The ever-weakening dollar had prompted many a fund to pile money into the sector since September last year, pushing values of some commodities well beyond fundamentals.”
“But now, as the dollar is staging somewhat of a comeback, even if a temporary one, the niche is being drained of money quite fast,” Nadler said.
With perceptions that the credit freeze might be thawing, hedge funds appear to be turning away from until now ultra-hot commodities, he said.
Zachary Oxman, senior trader at Wisdom Financial said: “You’re seeing heavy selling pressure and significant technical damage [in gold prices].”
“I’d look for further selling into the $870 level at this time,” Oxman said.
Culminating a tumultuous quarter, the benchmark gold contract lost $15, or 1.6%, to end Monday’s trading back at $921.50 an ounce.
For March as a whole, gold futures lost $50.60 — a drop of 5.2%. But for the first quarter, the precious metal still turned in a stellar performance, gaining $86.60 an ounce, a 10.3% increase.
“Given gold’s recent movements, the yellow metal will remain vulnerable to selling pressure in the coming sessions,” said James Moore, analyst at TheBullionDesk.com.
In a research note, Moore cited how the second quarter’s “traditionally weaker than the first due to general market cycles.”
The dollar extended gains Tuesday after the Institute for Supply Management’s manufacturing index unexpectedly inched higher to 48.6% in March from 48.3% in February. The euro was already under selling pressure after earlier news that Swiss banking giant UBS announced a further $19 billion wrote-down.
The dollar index, which tracks the performance of the greenback against a basket of other major currencies, soared 1.1% to 72.69.
Platinum tumbles 7%
Led by platinum, other metals futures also posted sharp losses on the Nymex. July platinum futures tumbled $144.60, or 7%, to $1,898.80 an ounce.
May silver futures fell 88 cents, or 5%, to $16.43 an ounce and June palladium fell $23.70, or 5%, to $426.50 an ounce. May copper futures dropped 10 cents, or 3%, to $3.73 a pound.
Crude-oil futures also dropped sharply.
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