Gold prices plunged to their lowest in more than five years today, Reuters reported, at one point dropping 4 percent on aggressive selling out of China. The price ended at US$1094.5 per ounce.
This will deepen the gloom in the local gold mining industry which has seen the Guyana Gold and Diamond Miners Association pleading over the last two years for relief measures from the government.
The dramatic sell-off in gold came in a matter of minutes in Shanghai. More than 33 tonnes of gold, worth about US$1.3 billion, traded in two minutes, Reuters reported.
The exact reason for the selling was unclear. Recent strength in the U.S. currency and expectations for higher U.S. rates have undermined the case for holding gold and other precious metals, while analysts also note that China imported a record volume of gold in 2013 that has created an oversupply situation. Still, Reuters said that the swiftness of the decline surprised traders and resulted in two separate trade halts in U.S. gold futures.
The spot price for gold was at US$1,094.5 an ounce, after hitting a low of $1,088.50 overnight.
“We have breached significant support levels, we know U.S. rate hikes are coming, there is no inflation and there is no catalyst to hold gold when other markets are doing better,” Societe Generale analyst Robin Bhar said, according to Reuters.
Miners here had accused the previous PPP/C government of not doing enough to relieve them of the stress of lower gold prices. This has seen a drastic decline in gold declarations and the exiting of hundreds of miners from the industry. Miners are seeking various concessions including on imports, fuel and the royalty rate. Discussions have begun with the new government.
Over the last five years or so mining had accounted for a significant chunk of Guyana’s GDP and foreign exchange earnings.
