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Gold Tumbles 5% as Dollar Surge Wrecks Commodities

CommoditiesJun 17, 2021 02:45PM ET
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By Barani Krishnan

Investing.com - Gold prices tumbled almost 5% to head back to the mid-$1,700 levels last seen in April as a surging dollar wrecked the prices of commodities priced in the greenback.

Front-month gold futures on New York’s Comex settled down $86.60, or 4.7%, at $1,774.80 per ounce. The session bottom was $1,768, a low not seen since April 30.

The spot price gold, reflective of real-time trades in bullion, was down $30.61, or 1.7%, at $1,781.04 by 2:25 PM ET (18:25 GMT), touching a six-week low of $1,767.34 earlier.

Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of futures.

Commodities from gold to oil tumbled after the Dollar Index rose toward the 92 level, rallying for a third day in row, with Thursday’s run-up fired by expectations that the Federal Reserve will raise interest rates at least twice by end of 2023 to 0.6% from current levels of zero to 0.25%.

The Fed also signaled at the end of its monthly policy meeting on Wednesday that it was looking out for data on when to start tapering its monthly asset purchase of $120 billion.

The central bank has been buying at least $80 billion in Treasury bonds and $40 billion in mortgage bonds to support credit markets and the economy since the COVID-19 outbreak last year.

“The Fed’s taper tantrum trade is hitting gold the hardest right now and could last a couple more sessions,” said Ed Moya, analyst at online broker OANDA, observed.

Moya observed that gold did not do a good job of defending its $1,800 level and momentum selling had since taken it 38% below the $1,919.20 high made at the beginning of June.

“Gold looks like a falling knife but eventually the longer-term prospects will attract buyers,” he said. “Long-term bets on gold could start to emerge closer to the $1750 level, but some might wait and see if one last thrust lower eyes the $1,675 level.”

Gold Tumbles 5% as Dollar Surge Wrecks Commodities
 

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Comments (9)
Pratt Man
Pratt Man Jun 17, 2021 6:11PM ET
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If you bought $1000 of gold 30 years ago, it would be worth $900 today. Yet your $1000 would be worth $1000 still. Gold is the worst investment that a person can make. Other than maybe crypto.
Ivan Dalion
Ivan Dalion Jun 17, 2021 6:11PM ET
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What? 30 years ago gold was at 400$...
Eat The Cat Media
Eat The Cat Media Jun 17, 2021 6:11PM ET
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I'm almost sure that 1000 30 years ago had substantially more buying power than 1000 today.
AIM Investor Journal
AIM Investor Journal Jun 17, 2021 6:11PM ET
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Eat The Cat Media  The dollar had an average inflation rate of 2.30% per year between 1991 and today, meaning prices are 1.98 times higher than average prices since 1991, according to the Bureau of Labor Statistics consumer price index. A dollar today only buys 50.60% of what it could buy back then. The gold price has risen more than 400% over the same period.
John Miller
John Miller Jun 17, 2021 6:08PM ET
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that's paper gold. physical not so much.
Don Burris
Don Burris Jun 17, 2021 4:50PM ET
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so let me get this straight. Feds create trillions upon trillions and we're drowning in debt and then the feds say they might start tapering in 2023. And that's why gold tanked. RIGGED!!
Joel Schwartz
Joel Schwartz Jun 17, 2021 4:50PM ET
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Search the term “JPM fined by DOJ for manipulating precious metals ans goverment treasury markets” online. JPM and GS are cartels.
خالد بكري
خالد بكري Jun 17, 2021 4:50PM ET
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gfds
Barani Krishnan
Barani Krishnan Jun 17, 2021 4:50PM ET
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Joel Schwartz  Absolutely true.
florencia feitosa
florencia feitosa Jun 17, 2021 4:11PM ET
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they will only raise rates in 2023, and gold has already dropped today to the same level as last month. this is bizarre.
Terence Williams
Terence Williams Jun 17, 2021 3:00PM ET
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Daily action is nothing to get excited about..but it does confuse the majority of people. We are in epic times..and the ride may get more..sporty. Plenty of clues which lead to more coming volatility.
Allatra Yiveh
AllatraYiveh Jun 17, 2021 1:58PM ET
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this is just an excuse for banks to cover their shorts and dump before basel III
oguz erdek
oguz erdek Jun 17, 2021 1:54PM ET
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BS , playing with people
François Du
François Du Jun 17, 2021 12:41PM ET
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.037% raise in 2023 and everybody is rushing...buying dollars. Smoke and mirrors.
Francesco Lucchesi
Francesco Lucchesi Jun 17, 2021 12:41PM ET
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surreal stupidity
Kim Andreasen
Kim Andreasen Jun 17, 2021 12:41PM ET
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Financial markets and to some extent the real world has been wrecked since 2008. Centralbanks have just been postponing the inevitable. I foresee another great depression in the coming years if inflation isn't transitory and rates will go up. Most governments will fail on their insane high debt and thousands of corporates will go bankrupt. It's not a doomsday forecast, it's likely the fact a few years from now.
Edoardo Spagarino
Edoardo Spagarino Jun 17, 2021 12:41PM ET
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the issue Is not the 0.375 in two Years, but the stop to the 120 billions per months in debt purchased.. at least my opinion
simone scelsa
simone scelsa Jun 17, 2021 12:41PM ET
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Edoardo Spagarino  that should strengthen gold, not the opposite.
Kim Andreasen
Kim Andreasen Jun 17, 2021 12:41PM ET
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simone scelsa higher inflation is positive for commodities including gold. QE is supporting inflation, so less QE is bad for gold. Should also be bad for stocks, but that has yet to materialize
tonald drump
tonald drump Jun 17, 2021 12:34PM ET
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When did they begin purchasing assets?
Kim Andreasen
Kim Andreasen Jun 17, 2021 12:34PM ET
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They been doing it more or less since 2008
 
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