By Jack Farchy , Financial Times, 25 Jan 2011
The price of gold fell to a three-month low as brightening prospects for the US economy sapped investor sentiment towards the yellow metal, which has thrived on economic uncertainty.
On the spot market, bullion dropped to an intraday low of $1,322.70 a troy ounce, the lowest since October and a 7.5 per cent correction from its record nominal high of $1,430.95 in December.
The almost unanimous bullishness that characterised the gold market's stunning rally last year – prices soared 30 per cent from the start of the year to their December peak – had dissipated in recent weeks, said bankers.
Speculators have amassed the largest number of bets on lower gold prices, or "short" positions, for five and half years, according to weekly data on the US futures market from the Commodity Futures Trading Commission.
On a net basis, speculative positioning was the least bullish since July 2009, said Suki Cooper of Barclays Capital in New York. "The short-term tactical interest has turned more negative towards gold," she said.
The shift has been driven by a perception that the US recovery is now on track, and therefore the Federal Reserve will look to tighten monetary policy after its programme of quantitative easing expires this summer.
Matthew Turner, precious metals strategist at Mitsubishi, the Japanese trading house, said: "Global interest rate rises are now imaginable and that has taken some of the gloss off this continual cheap money binge that had been propelling gold."
