Despite another round of losses in global stock markets, gold has been in decline for two days, at one point plunging to US$1,225/oz. Today the yellow metal failed to recapture the US$1,240/oz mark it gave up yesterday and, after staying in the high $1,230s, slid to US$1,234/oz.
The demand for gold was strong yesterday after the Fed yet again decided to leave the current ultra-low interest rates unchanged. The decision was accompanied by caution over the strength of the ongoing recovery, which the Fed said was not supported by the current financial conditions, referring to the European debt crisis. The news provided the yellow metal with enough support to stay above US$1,240/oz.
Adding to the negative sentiment were this week’s housing updates that came out in the US, showing declines of 2.2% and 32.7% in existing and new home sales respectively in the month of May.
Gold has been seen as a safe haven asset and usually came in demand amid negative economic updates and declined in stock markets.
Following recent gains, which put gold at a new all time high of US$1,266/oz, investors have been selling the asset to reap profits, leading to declines in gold prices.
Other precious metals followed gold as silver and platinum retreating to US$18.31/oz and US$1,545/oz respectively.
Major mining stocks were in decline. Silver miner Fresnillo (LON:FRES) and platinum producer Lonmin (LON:LMI) lost nearly 3%, while gold miner Randgold Resources (LON:RRS) retreated 1.2%.
Specialty chemicals firm Johnson Matthey (LON:JMAT) posted a small lost.
Aquarius Platinum (LON:AQP) was the biggest faller among the midcaps with a 4.6% decline. Gold miner Petropavlovsk (LON:POG) and silver producer Hochschild Mining (LON:HOC) dropped 3.8% and 2.4% respectively.
Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) and Turkey and Ethiopia operating gold miner Stratex International (AIM: STI) outperformed the market, surging 10% and 6% respectively.
Junior diamond miner Stellar Diamonds (LON:STEL) and Turkey and Saudi Arabia operating gold explorer KEFI Minerals (AIM: KEFI) slipped 8% and 6% respectively.