Gold Prices Plunge

From the Wall Street Journal:

Gold continued to take a battering on the spot market Monday, shedding nearly another $100 per troy ounce after weaker than expected data on Chinese first quarter growth sparked a new wave of selling on concerns that China and India, the world's two biggest buyers, may slow purchases.

Around midday in Europe, spot gold was down 5.2% at $1,404 a troy ounce, having earlier tumbled around $95, or 6.4%, to a two-year low at $1,385.88/oz. This follows Friday's rout, when the metal fell 5%, pushing it into bear-market territory.

Gold prices have plunged some 11%, or $170 an ounce, over the past week.

Worries are spreading that Asian buying, which has helped prop up gold prices for years, may be fading. China reported its economy unexpectedly slowed last quarter, spurring fears that Chinese consumers, faced with less cash, may stop purchases. In India, the largest gold industry group warned that the country is losing confidence in the metal because of the recent slide. Investors in Europe cashed out of the metal en masse amid concerns that U.S. stimulus may be cut short, and following news that Cyprus may sell a chunk of its gold reserves to fund part of its bailout package.

"The market saw gold going lower and everyone panicked," said Pradeep Unni, head of research at Richcomm Global Services, a Dubai-based commodity broker. "The most important factor for gold now is Indian and China demand."

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