By Debarati Roy and Nicholas Larkin - Sep 24, 2011 3:08 AM GMT+0700
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“Gold has become the source of liquidity for global margin calls,” said Michael A. Gayed, the chief investment strategist at Pension Partners LLC. Photographer: Junko Kimura/Bloomberg
Sept. 23 (Bloomberg) -- David McAlvany, chief executive officer of McAlvany Financial Group, talks about the outlook for commodities and the price of gold. He speaks with Owen Thomas on Bloomberg Television's "Countdown." (Source: Bloomberg)
Gold fell, capping the biggest two- day plunge since 1983, on investor sales following routs in global equity and commodity markets.
More than $3.4 trillion has been erased from equity values this week, sending a global measure of shares into a bear market, on concern that governments are running out of tools to avert a recession. The Standard & Poor’s GSCI Index of 24 commodities fell to a nine-month low today. Gold has dropped 15 percent since reaching a record $1,923.70 an ounce on Sept. 6.
“Gold has become the source of liquidity for global margin calls,” said Michael A. Gayed, the chief investment strategist at Pension Partners LLC. “Also, deflationary pressures are acting on gold.”
Gold futures for December delivery fell $101.90, or 5.9 percent, to settle at $1,639.80 at 1:51 p.m. on the Comex in New York, the biggest decline since March 2008. In two days, the metal dropped 9.3 percent, the most since February 1983. The weekly decline of 9.6 percent also was the most since that year.
“It’s difficult to say at what level this liquidation will stop,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Slowing growth has created pressure on gold and commodities from the deflation angle.”
“We are seeing a flight to cash because 2008 is still very fresh in people’s minds,” Marshall Berol, a co-portfolio manager of the Encompass Fund in San Francisco, said in a telephone interview.
In October 2008, gold prices tumbled 18 percent as the most-severe slump since the Great Depression spurred losses in global equity and commodity markets. The metal jumped 23 percent in the next two months.
“We view the correction in gold as being temporary and similar to initial losses suffered in 2008,” Suki Cooper, an analyst at Barclays Capital in New York, said in a report.
On the New York Mercantile Exchange, platinum futures for October delivery dropped $97.40, or 5.7 percent, to $1,613.20 an ounce. Palladium futures for December delivery fell $21.55, or 3.2 percent, to $642.50 an ounce.
To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
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