Gold fell below $1,600 an ounce Friday for the
first time since August as sell stops were activated when prices fell
below prior chart support around the previous lows for the year,
traders and analysts said.
As of 11:05 a.m. EST, spot gold was $29.70,
or 1.8%, lower to $1,605.20 an ounce and has been as weak as $1,598.20.
The most-active April futures contract on the Comex division of the
New York Mercantile Exchange was down $31.30, or 1.9%, to $1,604.20,
bottoming at $1,596.70.
“We reached some long-standing support at
$1,625-30,” said Robin Bhar, metals analyst with Societe Generale. “We
moved through there, and that set off some more momentum-based
selling.”
Afshin Nabavi, head of trading with MKS
(Switzerland) SA, also cited technical stop-loss selling around
$1,625-30, coupled with the continued absence of potential Chinese
buying this week due to Lunar New Year holidays. Further stops were hit
around $1,615, he added.
Stops are pre-placed orders automatically
activated when certain price points are hit. Traders use them to kick
themselves out of trades to either capture a profit or limit losses, or
else to open new positions to capitalize on a short-term move.
Sentiment toward gold has been hurt lately
by improved optimism about a global economic recovery, Bhar said. As a
result, he continued, some market participants have exited gold as a
hedge and are instead chasing equities and other commodities.
Both Nabavi and Bhar see potential for gold
to bounce next week, however. Participants in China will be back in the
markets, plus buying can be expected in India ahead of another wedding
season. A World Gold Council report this week listed these as once
again the world’s two largest consuming nations in 2012.
“There might be a corrective bounce higher…on some physical buys,” Bhar said.
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