Gold, which scorched into the record books earlier this year, has suddenly gone cold.
Prices for the precious metal – which touched $1,000 an ounce for the first time in March – have plunged in recent weeks, and on Friday tumbled below $800 for the first time since late last year. It has been a sharp reversal for a bellwether of the commodities boom that only months ago seemed poised to soar to uncharted heights.
“All of the sudden, it seems like the bottom fell out,” said David Beahm, a vice president at New Orleans-based gold dealer Blanchard and Co., who nonetheless believes the metal's decline is overblown and that prices will go up again later this year.
The dramatic sell-off – gold has slashed more than $100 off its prices since Aug. 1 – comes amid a host of bearish factors that have dented the metal's safe-haven appeal: The once-limping dollar is strengthening against its rivals, crude oil is easing from record levels and signs suggest the worst may be over for the flagging U.S. economy.
“It's very difficult to make a bullish argument for gold,” said Rob Kurzatkowski, a futures analyst with OptionsXpress in Chicago. “There's just too many factors going against it at this point for traders to get really enthused about it.”
Gold's drop Friday came as the dollar surged again, responding this time to the Federal Reserve's report of higher-than-expected industrial output for July. The greenback's rally comes as a slowdown among European economies weighs down the 15-nation euro, which bought $1.4672 in trading Friday, down from $1.4811 late Thursday.
The healthier dollar led traders to unload gold contracts Friday, with December futures slipping $22.40 to settle at $792.10 an ounce on the New York Mercantile Exchange. Prices earlier dipped more than $35 to $777.70, the lowest since Oct. 26, and 25 percent off the all-time trading high of $1,033.39 reached March 17.
Silver also made a stunning drop Friday, losing as much as 14 percent during the day. Silver for December delivery shed $1.43 to settle at $12.93 on the Nymex, its lowest close since almost a year ago.
Other commodities have also been battered lately, driven lower as falling oil prices prompt investors to dump positions in hard assets. In the past two months alone, platinum has lost 33 percent, silver 25 percent and copper 9 percent.
Still, gold's spiral seems to have taken even veteran market observers by surprise. Jon Nadler, an analyst with Kitco Bullion Dealers Montreal, said Friday's free-fall was characterized by a “magnitude and viciousness” that were frightening.
“You can almost call it quits for the bull market,” he said. “A lot of money has left.”
But some analysts say it's too soon to bid goodbye to gold.
For one thing, demand for physical gold, such as jewelry, coins and bullion, typically falls off in the summer months and then picks up again toward the end of the year, especially in big gold-buying countries like India.
“As we move out of the summer months, gold could recoup and move above $900 again, but it's going to be difficult,” said Michael Widmer, director of metals research at Lehman Brothers in London.