Gold slumps 2 percent, ends below $1,600 an ounce

AP News
Posted: Sep 26, 2011 5:33 PM
Gold slumps 2 percent, ends below $1,600 an ounce

Gold prices sank Monday, sending the metal below $1,600 an ounce for the first time since July.

Gold slumped $45, or 2 percent, to close at $1,594.80. Silver dropped 0.4 percent to end at $29.976 an ounce.

Gold plunged 9.6 percent last week, following the stock market lower. Silver also lost 10.7 percent. The Dow Jones industrial average sank 6.4 percent that week, the biggest drop since October 2008 at the height of the financial crisis.

Precious metal prices continued to fall Monday even as the Dow gained 2.5 percent. Stocks rose on optimism that European finance ministers might soon take action to stem the debt crisis there. The slump has marked a sudden turnaround for gold contracts, which were trading for $1,859.50 an ounce earlier this month.

Part of the reason gold and silver prices continued their slide is that investment managers are selling off metals contracts to offset some of the losses in their stock portfolios, said George Gero, precious metals strategist at RBC Capital Markets.

While metals prices have fallen, they have still appreciated more over the last year than many stocks, Gero said. That means traders can reap profits from selling gold contracts to offset losses in the stock market. Even after its recent plunge, gold is still up 26 percent from this time last year. Silver is up 44 percent. Over the same time period the S&P 500 index is up just 1.2 percent.

"They have to sell gold as one of their best performers," Gero said. "We've been seeing deterioration (in the gold market) since the middle of August, when you started seeing these very volatile days in the stock markets."

December silver fell 12.5 cents, or 0.4 percent, to end at $29.976 an ounce. Silver had fallen much more during midday trading, dropping below $28 an ounce before rallying in the afternoon.

December copper gained 0.3 cents, or less than 1 percent, to finish at $3.283 per pound and October platinum fell $66.30, or 4 percent, to $1,546.90 an ounce. December palladium fell $15.10, or 2.4 percent, to $627.40 an ounce.

In other trading, benchmark oil gained 39 cents to finish at $80.24 per barrel on the New York Mercantile Exchange.

Heating oil fell 0.29 cents to $2.803 per gallon, gasoline futures rose 0.4 cents to $2.5284 per gallon and natural gas fell 8.1 cents to finish at $3.782 per 1,000 cubic feet.

September wheat gained 7.5 cents to end at $6.4825 per bushel, corn rose 9.5 cents to $6.48 per bushel and soybeans fell 1.75 cents to finish at $12.5975 per bushel.