Gold posts largest loss in 1 1/2 years as speculator-fueled rally fizzles

May 31, 2001|By BLOOMBERG NEWS

NEW YORK - Gold had its biggest loss in 1 1/2 years yesterday on selling by speculators whose purchases sparked a weeklong rally to a 15-month high May 21.

A report from the Commodity Futures Trading Commission showed that speculators last week had bought almost four times more gold futures contracts than they had sold. Speculators began reversing their bets on further price gains by selling contracts when the rally stalled, traders said.

"There was no fundamental reason for prices to go up in the first place," said Donald Eckert, head of precious metals trading at J. P. Morgan Chase & Co. in New York. "Then we got the CFTC report, which was extremely negative. It means there is nobody left to keep buying."

Gold for August delivery fell $7.70, or 2.8 percent, to $267.40 an ounce yesterday on the Comex division of the New York Mercantile Exchange, the seventh-straight loss and biggest one-day decline since Nov. 1, 1999.

Gold futures have fallen 10 percent from the intraday high of $298.60 on May 21, erasing the weeklong gain and leaving prices 3 percent lower than at this time last year. Gold had similar speculator-driven rallies in February last year and September 1999 that soon collapsed. The gain earlier this month was partly sparked by a decline in sales of borrowed gold by producers, analysts said.

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