Gold prices took a beating Tuesday, plunging nearly 2% and marking the yellow metal's worst day of the year.
June gold finished the session down $24.50, or 1.83%, to $1,303.10 an ounce. Spot gold was last quoted off $23.80 at $1,303.25.
Spot gold prices fell to a low of $1,228 an ounce intraday, but managed to claw back some gains in the afternoon. Still, even fresh Consumer Price Index (CPI) figures showing a slightly higher than expected read on inflation in March failed to goose gold prices much.
Fueling the slide was profit taking - gold hit a three-week high in the prior session. Sizeable long positions accumulated Monday as gold traded over $1,320 an ounce, and there were plenty of shorts today, Chintan Karnani, chief market analyst at Insignia Consultants in New Delhi, told MarketWatch. A huge number of stop-loss orders were triggered when gold slipped below the key $1,300 level.
Gold wasn't the only metal battered Tuesday. The pain was felt across the entire precious and basic metals markets - from copper to palladium.
"It started off with nickel," a New York trader told Kitco. "We're just having kind of a panic in thin markets."
News that tensions are again flaring up between Ukraine and Russia failed to stoke investors' fears and provide some support for safe-haven gold. Underscoring the growing geopolitical unrest simmering in the region, Ukraine's acting president launched an "anti-terrorism operation" in the besieged eastern areas Tuesday and seized an airport about 120 miles from Russia.
"It is a case of once bitten twice shy," Karnani explained. Traders took a bullish gold stance Monday on Ukraine unrest, with the yellow metal gaining 0.6%, or $8.50 an ounce, to $1,327.50.
"Now they are extra cautious going long. The rise (if any) will be slow and steady unlike the fall which was quite fast," said Karnani.
Also weighing on gold prices was a report released Tuesday from the World Gold Council -- although it has some bullish news for the long-term gold outlook...
China News Hits Gold Prices Today
The WGC reported that demand in the world's biggest gold consumer nation, China, is apt to stay flat this year. China's gold demand this year will be slow compared to a record high hit in 2013.
That's truly troubling because gold consumption in China has expanded every year since 2002, with last year particularly strong. Demand in the Asian nation surged 32% in 2013, propelling the country past India to take the top spot in the rankings of the world's gold consumers.
But, it's unlikely that the robust pace will be as strong this year even if gold prices dip further, the WGC added.
"We're looking at best for it to be on par with 2013," Albert Cheng, managing director for the Far East at the World Gold Council, told The Wall Street Journal.
Among reasons cited are that many in China believe they already have enough of a gold stash, and the latest rebound hasn't been substantial enough to lure new buyers.
While demand may be muted this year, things look much brighter medium term. Demand for gold bars and coins in China could reach close to 1,350 metric tons over the next four years as an increasing population grows more affluent, the WGC adds. That would be a hefty 25% increase by 2017.
Before Tuesday's rout, gold was up a healthy 10% year to date, handily besting returns from the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq. Since the start of the year, the benchmarks are down roughly 2.5%, 1%, and 4% respectively.
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- Wall Street Journal:
China Is Losing Its Voracious Taste for Gold
Metals Weaker Across the Board; Technical Selling Exacerbates Slides
- World Gold Council:
China's Gold Market: Progress and Prospects
Gold Drops Nearly 2%; Silver, Copper Take Hits