Gold and silver sank to their lowest since 2010 on Friday as the dollar surged against the yen and other major currencies after the Bank of Japan shocked global financial markets by expanding its massive stimulus spending.
Spot gold broke below $1,180 an ounce, a level bullion had held twice during its last two major sell-offs in June and December last year. It also briefly held the mark earlier this month until Friday’s drop.
The yen plunged to a near seven-year low against the US dollar on Friday, putting it on track for its worst day in 18 months, after the Bank of Japan shocked financial markets with an aggressive easing of its monetary policy.
“The main reason for gold's fall is the strength in the dollar after the BoJ’s desperate efforts to weaken the yen," said Jeffrey Sica, president and chief investment officer at Sica Wealth Management, which oversees $1 billion in client assets.
“Gold could fall further in the short-term as the dollar could rise more in the short-term, but gold should eventually benefit as a hedge against the uncertainties and economic turmoil brought by central bank actions," Sica said.
Spot gold, silver
Spot gold slid as much as 3 per cent to its lowest since July 2010 at $1,161.25 an ounce in earlier trade. It was last down 2.25 per cent at $1,171.71 by 3:57 p.m. EDT (1957 GMT) for its biggest one-day rout since July.
The metal breached important support levels at $1,200 and $1,180, where stop losses — automatic sale orders — were placed and was on track for a 4.8 percent drop this week, the biggest weekly decline since June 2013.
US Comex gold futures settled down 2.25 per cent at $1,171.6.
Spot silver earlier fell 4 per cent to its lowest since February 2010 at $15.76 an ounce and was poised for a fourth straight monthly drop. It was down 1.71 per cent at $16.14.
Gold and silver were already facing some heat after the US Federal Reserve earlier in the week largely dismissed financial market volatility as factors that might undercut progress towards its unemployment and inflation goals.
SPDR Gold Trust
Reflecting bearish investment sentiment, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.16 per cent to 741.20 tonnes on Thursday, a six-year low.
Still, retail demand remained healthy. US gold coin sales jumped 22 percent in October to their highest since January.
Among the other precious metals, platinum fell 0.7 per cent to $1,229.5 an ounce, while palladium rose 1.8 per cent to $788.5 an ounce.