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02 March 2024

Will gold sink to $1,650 as 'mystery sellers' dump yellow metal?

By Vicky Kapur

Spot gold prices tumbled to a near 30-day low of $1,687 a troy ounce Thursday morning, down $63 per ounce from last week’s high of $1,750/oz as rumours of a mystery seller unwinding a major hedged position gained currency.

“We’re actually seeing a fairly mysterious seller in the Asian time zone over the last week on two occasions,” said Jeff Rhodes, CEO of the Dubai-based INTL Commodities.
According to him, the ‘mystery seller’ times his deals in the “twilight period”, or after the London market closes and just before the Asian markets really get going, when the trading is thin. “We’ve seen some fairly large sell orders hit the market in this twilight zone,” he told the Dubai Eye 103.8 radio station.
The large sell orders in a thinly traded market have had “quite an impact” says Rhodes, with gold plunging from $1,750 to just above $1,690. “It’s mysterious – I can’t explain it,” he says. “It’s almost as though there is a speculator or speculators who are just trying to trigger a technical move to the downside,” Rhodes maintains.
The yellow metal continued to edge down on Thursday, holding near a one-month low of $1,684 that it made yesterday, as a stronger dollar kept the pressure on precious metals in general.
While physical bargain buying was evident in Asian markets, thin volumes failed to make any positive impact on gold prices and the metal remains in a short downtrend that analysts are partly blaming on the stalemate in ‘fiscal cliff’ negotiations in the US.
“Maybe that [large mystery sell orders aimed at triggering a downside move in prices] are a prelude to buying gold,” says Rhodes. “I don’t know but there are definitely some funny games going on at the moment,” he suggests, and adds that he thinks these games will continue through to the year-end.
If indeed the mystery sales continue for another couple of weeks as Rhodes suggests, gold prices are in for a further downside, perhaps inching towards the $1,650/oz mark. “It’s going to be an interesting market for the next three weeks,” reckons Rhodes as his experience shows that this is the thinnest period of the year.
“Many players are closing their books for the year – they’ve either made what they’ve made for the year, or they’ve lost and don’t want to lose anymore… Either way, they take to the sidelines and that results in exactly the kind of market conditions where you see erratic price movements,”he says.
Nevertheless, on Wednesday, Goldman Sachs cut its 2013 gold forecasts and said gold’s current bullish price cycle could take a U-turn next year as a rise in real interest rates on the back of improved growth offsets any further balance sheet expansion from the Federal Reserve.
Goldman cut its three, six and 12-month forecasts for gold prices to $1,825/oz, $1,805/oz and $1,800/oz, respectively.
The investment bank also introduced a 2014 forecast of $1,750 an ounce, suggesting price growth could tail off.