Gold dropped more than 3% on Tuesday, after a steep drop in oil prices and a rally in the US dollar reduced bullion's appeal.Gold fell to a low of $US790.40 an ounce - its lowest level since August 19 - before recovering slightly to finish 3%, or $US24.70 lower, at $US810.50 an ounce on the COMEX division of the New York Mercantile Exchange.Silver, platinum and palladium also fell heavily, losing between 3 and 5%."Gold's leading the way down,'' said Commerzbank trader Rory McVeigh. "We've seen a shift in emphasis where people are now selling commodities to move their assets back into dollars.''The US dollar extended its rally to a 10-1/2-month high against a basket of currencies on Tuesday, with a near $US7 drop in oil prices fuelling the currency's recovery.The boom in gold and oil prices over the past year has been fuelled in part by weakness in the US currency, with investors buying commodities as a hedge against the greenback's decline to multi-year lows.With the US dollar now strengthening, investors have been unwinding commodity positions, with base metals, soft and agricultural commodities all falling on Tuesday.The US dollar has taken an extra boost from the decline in oil prices, with the outlook improving for the United States' energy intensive economy."The reverse correlation between the dollar's recovery against the euro and the gold price has been quite impressive lately,'' said Standard Chartered analyst Daniel Smith."Gold investors are watching the oil price very closely and with oil coming down, prices have come off.''
The relationship between moves in oil and the dollar's recovery has weighed doubly on gold, as the precious metal generally acts as hedge against fuel-led inflation and as an alternative investment to the US currency.Gold has lost more than 20% in value since spiking to an all-time high of $US1030.80 in March.Since July, the dollar has recovered about 15 cents from its all-time low of $US1.60 against the euro, while crude prices are now about $US40 below all-time highs seen above $US147 a barrel in the same month. Physical buying has kept gold supported near $US800 an ounce, with rising evidence demand from Indian jewellers is returning now prices have come off their highs.Gold imports into India - one of the top consumers of the metal - jumped 45% in August year-on-year, the first annual rise seen in 2008.Dealers in Delhi said demand was expected to rise ahead of the Indian festival season, while jewellers in the Middle East said they had seen resurgent buying recently.Turkish gold imports soared by 70% in August to 47.2 tonnes, however they are down by around 25% for the first eight months of the year. Declines in gold have added to pressure on other precious metals already faltering due to concerns over slowing demand.Spot platinum dropped to a low of $US1363.50 an ounce from $US1439.00/1451.00 late in London, before edging back to $US1380.00/1400.00 an ounce.Rising concerns about demand for autocatalysts due to poor car sales and a slowing US economy have hit prices hard, dragging them some 40% lower from the all-time high of $US2290 an ounce back in March."Japanese sales of automobiles in August were below 200,000 cars, so it's very bad figure. The platinum price is under pressure. It's a very bearish factor,'' said Kazuhiko Saito of Interes Capital Management in Tokyo.Autocatalysts, used to clean exhaust fumes, account for more than 50% of global platinum demand.
The relationship between moves in oil and the dollar's recovery has weighed doubly on gold, as the precious metal generally acts as hedge against fuel-led inflation and as an alternative investment to the US currency.Gold has lost more than 20% in value since spiking to an all-time high of $US1030.80 in March.Since July, the dollar has recovered about 15 cents from its all-time low of $US1.60 against the euro, while crude prices are now about $US40 below all-time highs seen above $US147 a barrel in the same month. Physical buying has kept gold supported near $US800 an ounce, with rising evidence demand from Indian jewellers is returning now prices have come off their highs.Gold imports into India - one of the top consumers of the metal - jumped 45% in August year-on-year, the first annual rise seen in 2008.Dealers in Delhi said demand was expected to rise ahead of the Indian festival season, while jewellers in the Middle East said they had seen resurgent buying recently.Turkish gold imports soared by 70% in August to 47.2 tonnes, however they are down by around 25% for the first eight months of the year. Declines in gold have added to pressure on other precious metals already faltering due to concerns over slowing demand.Spot platinum dropped to a low of $US1363.50 an ounce from $US1439.00/1451.00 late in London, before edging back to $US1380.00/1400.00 an ounce.Rising concerns about demand for autocatalysts due to poor car sales and a slowing US economy have hit prices hard, dragging them some 40% lower from the all-time high of $US2290 an ounce back in March."Japanese sales of automobiles in August were below 200,000 cars, so it's very bad figure. The platinum price is under pressure. It's a very bearish factor,'' said Kazuhiko Saito of Interes Capital Management in Tokyo.Autocatalysts, used to clean exhaust fumes, account for more than 50% of global platinum demand.
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