Gold price slump accompanied by record high trading volume
central banks of emerging economies are also likely to take advantage of the low price levelvia Commerzbank
Yesterday saw panic selling of gold and silver. The gold price collapsed by more than 9% on a closing price basis and thus suffered its highest daily loss in percentage terms since February 1983. In absolute terms, the loss of around $135 per troy ounce actually constituted the highest daily fall of all time. Overnight, the price of gold dropped temporarily to $1,322 per troy ounce, its lowest level since the end of January 2011.
As such, gold is now nearing the next important technical support level of $1,300. In euros, gold dipped for a time to €1,014 per troy ounce, putting it at its lowest level since May 2011. As on Friday, yesterday’s price slide went hand in hand with exceptionally high trading volumes – a record trading volume of over 750 thousand contracts was achieved on the COMEX in New York.
This exceeded the previous record figure from the end of November by 54%. On paper, more than 2,300 tons of gold were thus traded in the course of a single day, which equates to a good 80% of total annual gold mining production. The gold price is managing to recover somewhat this morning and has inched up by 2% to around $1,380 per troy ounce. The low prices are clearly being viewed as an attractive opportunity to buy gold, above all in Asia.
What is more, the central banks of emerging economies are also likely to take advantage of the low price level to buy additional gold to diversify their currency reserves. The impact of the gold price slump on mining companies should not be ignored, for at prices of below $1,400 per troy ounces some gold producers will find themselves in trouble. If the price remains at this low level, or indeed if it were to fall even further, a number of companies would doubtless scale back their production, thus withdrawing supply from the market.