TORONTO — The price of gold plunged more than US$100 an ounce on commodities markets Wednesday as investors felt more confident in the economy and cashed in profits on recent record gold highs.
The price of the precious metal for December delivery fell US$104 in New York — or more than five per cent in the largest one-day drop in nearly three years. Gold closed at US$1,757.30 an ounce.
That’s gold’s biggest single-session drop since the precious metal fell $146 in September 2008 — just before the recession began in Canada.
Gold, which is making a historic climb as the flight-to-safety investment for many of the world’s banks, traders, hedge funds and money managers — is still up 24 per cent this year.
But it took a pounding Wednesday after a U.S. government report showed new orders for long-lasting U.S. manufactured goods rose in July.
That got investors more optimistic about the stock market and the prospect the ailing American economy will escape a double-dip recession.
The stunning fall in gold prices over the last two days ended a string of record high closes that pushed bullion to just under US$1,900 on Monday.
Analysts say investors who bought gold at lower prices are now cashing in their profits. But as that selloff escalates, it encourages more investors to sell.
The price of gold had gained nearly US$300, or almost 19 per cent since the beginning of August as investors flocked to the precious metal which is seen as a safe haven in shaky economic times.
Investors had been worried about the European debt crisis and feared the United States could slip back into recession.
MF Global senior trader Azim Hajee said the price of gold had gone up too fast, climbing about $200 in the last week alone.
“The gold market has gone high enough and gold investors figured its time to take some money off the table,” he said.
“There were some rumblings in the market that the market had been overdone and it was due for a fair-sized correction.”
He said gold prices could fall another $100 an ounce over the next six to eight weeks. But he still predicts the metal will hit the milestone $2,000 per ounce by the end of the year because the U.S. dollar could weaken further.
“Bonds and government debt for sovereign debt they’re issuing — at some stage the Chinese and the Japanese will lose confidence and the Chinese are already dumping some of the U.S. treasuries,” Hajee said.
“That would force a lot of investors to jump the boat out of treasuries into gold.”
Investors are growing more confident about the global economy as recent economic news has been more encouraging. Orders for long-lasting manufactured goods shot up 4 per cent in the U.S. last month, which prompted investors to sell gold after it’s big run-up.
In other commodities trading, oil, other metals and agricultural products were mixed.