MASTER MIND FINNASSET: Gold drops around 3% on radical jump in dollar

Wednesday, October 20, 2010

Gold drops around 3% on radical jump in dollar

US currency hits two-week highs and commodities turn pale as China hikes rates for first time in three years

Gold witnessed a massive collapse yesterday following across the board sell off in commodities as the US Dollar recorded massive gains and a surprise rate hike from China caught investors off guard. The global equities sunk and Gold also caved in, as the critical $1350 mark was broken below in New York without offering much of a resistance.

China hiked its one-year benchmark deposit rate to 2.50% from 2.25 %and the one-year lending rate to 5.56% from 5.31%. The move marked the first rate change for the world's second largest economy since December of 2007.

The commodity was mixed in Asia yesterday, but extended the slide post a rate hike from China in London trades as dipped around $40 to $1332.30 by in New York before it rallied back higher for a bit, but it then fell back off again in afternoon trade and ended with a loss of 2.58% at $1336 per ounce.

MCX Gold futures also broke under Rs 19800 per 10 grams mark and ended the day under Rs 19600. The counter shed Rs 333 per 10 grams to end at Rs 19558 per 10 grams after tumbling to a low of Rs 19517 per 10 grams. The commodity has witnessed a bounce back in Asia, with the prices quoting slightly higher at $1938.90, up $2.90 per ounce from the previous close. US dollar has lost out slightly after testing its two-week high of 1.3696 against the Euro.

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