“The selloff in gold that cut futures 13 percent over two days was sparked by investor concern that European governments may have to follow Cyprus in selling part of their holdings, according to Goldman Sachs Group Inc.
The slump, which drove prices to their lowest level since January 2011 today, was exacerbated as the metal fell below so- called technical-support levels, analysts including Jeff Currie and Damien Courvalin said in a report dated today, entitled “There Are Weeks When Decades Happen.”
Gold has plunged into a bear market as investors reduced holdings in exchange-traded products amid signs the U.S. economy is recovering, paring haven demand. Goldman said April 10 the turn in the gold cycle was quickening and investors should sell the metal. The drop in the past two days was one of the largest corrections in modern history, according to Deutsche Bank AG.
“The sharp selloff in gold was triggered by growing fears that the central bank of Cyprus would sell its gold reserves, potentially reflecting a larger monetization of gold reserves across other European central banks,” the Goldman analysts wrote in the report dated today.
Bullion for June delivery was 1.3 percent higher at $1,378.50 an ounce on the Comex at 5:33 p.m. in Singapore after losing as much as 2.9 percent to $1,321.50. Futures plunged 9.3 percent yesterday after entering a bear market last week, falling more than 20 percent from the record close in 2011.
