Global Prices of Gold, Platinum Fall to Lowest in Over 5 Years

Gold plunged 4 per cent to its lowest in more than five years on Monday with platinum also sinking 5 per cent to its weakest since 2009 as investors sold the precious metals on the outlook for the US dollar.

It was a sudden, massive drop for gold and platinum prices as they breached critical support levels as the dollar strengthened on growing expectations that the US Federal Reserve will hike interest rates this year.

"It looks like someone was taking advantage of the low liquidity environment at the moment. It's a bit of speculative selling going on," said Victor Thianpiriya, analyst at ANZ Bank in Singapore.

Nearly 900,000 lots were traded on a key contract on the Shanghai Gold Exchange, compared to less than 27,000 lots on Friday, Reuters data showed. Prior to Monday, volume for July had averaged less than 30,000 lots.

"The market looks very technically weak and the biggest buyer of all, China, is now selling gold as opposed to buying it on price dips. That's a recipe for weaker prices," said Thianpiriya.

China said on Friday its gold reserves were up 57 per cent at the end of June from the last time it adjusted its reserve figures more than six years ago. Despite the tonnage increase, gold now accounts for 1.65 percent of China's total forex reserves, against 1.8 percent in June 2009.

Spot gold was down 2.4 per cent at $1,106.90 an ounce by 0302 GMT after falling as far as $1,088.05, its lowest since March 2010.

Gold has breached key support levels as the dollar gained after Federal Reserve Chair Janet Yellen told Congress last week that the Fed is on course to raise interest rates if the US economy expands as expected.

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Euro down 0.8 per cent

Euro down 0.8 per cent; commodity currencies at multi-year lows

The euro fell nearly 1 percent against a buoyant dollar on Tuesday, as German 10-year Bund yields edged lower and interest rate differentials moved against the common currency.

The dip in Bund yields and the euro came after the European Central Bank left emergency liquidity for Greek banks at current levels but increased the haircuts on the collateral it demands. That kept alive fears Greek banks will soon run out of cash and that Greece's problems will spread to other Southern Europea ..

Traders said the next 24 hours could be crucial. Euro-area leaders and finance ministers are meeting in Brussels to discuss Greece and a lack of progress could put pressure on the euro.

European Commission President Jean-Claude Juncker told the European Parliament on Tuesday Greece's government must come forward with proposals to resolve its debt crisis. He said he still opposed calls for Greece to be forced out of the euro.

Since Athens missed a debt payment to its creditors and Greek voters rejected tough conditions for further bailouts, the euro has retreated from its mid-June highs of $1.14, but there has been no panic selling. One reason is expectations the ECB will take action, including more quantitative easing, to stabilise the market.

Against the dollar, the euro was down 0.9 per cent at $1.09605, a one-week low, with a drop below $1.0955 set to take it to its lowest in more than a month. The dollar index rose 0.7 per cent to 96.903, a one-month high.

"It is a drift lower for the euro," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "The markets are reasonably relaxed at this stage because they believe the ECB will step in to take action to contain any contagion, should Greece step out of the union."

Despite the euro's resilience, Greece's future in the euro zone and its fiscal woes cloud the currency's long-term prospects, analysts said.

Meanwhile, commodity currencies fell sharply, with the Australian dollar hitting a six-year low as Chinese stock markets went into a tailspin while oil-rich Norway's crown struck a six-month low after a sell-off in crude oil.

The Australian dollar, which is a proxy for Chinese investments, fell 0.9 percent to $0.7425, with a drop in iron ore prices also weighing, traders said. The New Zealand dollar also hit a five-year low of $0.6620.

The Norwegian crown fell 0.7 per cent against the euro to 8.9964 crowns, its weakest since mid-January. The Canadian dollar, which also has a strong correlation to oil, hit a three-month low of C$1.2708 against its US counterpart .

"The drop in crude oil over the past week has materially weighed on the Canadian dollar," ING analysts said in a note.

"The domestic outlook has also failed to lend support; the soft GDP print and disappointing second-quarter business outlook figures have increased the pressure on the Bank of Canada." 

Gold inches up on jewellers buying, global cues

Gold prices advanced by Rs 20 to Rs 26,570 per ten grams at the bullion market on Monday on increased buying by jewellers amid a firm global trend. Silver, however, met with resistance and fell by Rs 200 to Rs 36,000 per kg.

Traders said pickup in buying by jewellers and a firm global trend on safe-haven demand after Greek voters have rejected more austerity demands from creditors, influenced gold prices.

Gold in Singapore, which normally sets price trend at the domestic front, surged 0.6 per cent to $1,175.45 an ounce. In the national capital, gold of 99.9 and 99.5 per cent purity advanced by Rs 20 each to Rs 26,570 and Rs 26,420 per ten grams, respectively. It had gained Rs 50 on Saturday. Sovereign, however, continued to be traded at last level of Rs 23,300 per piece of eight gram.

On the other hand, silver ready declined by Rs 200 to Rs 36,000 per kg, while weekly-based delivery moved up by Rs 270 to Rs 35,950 on speculators buying. Silver coins, however, remained flat at Rs 54,000 for buying and Rs 55,000 for selling of 100 pieces.