Gold ETF investors stampeded for the exits Wednesday as spot
gold prices breached $1,400 an ounce while a flurry of economic
news banished the rationale for owning the yellow metal as a safe
The U.S. dollar, which typically trades opposite the metal,
raced to a 10-month high against foreign currencies. The euro --
which makes up more than half the index -- weakened as the
eurozone recession extended into the sixth quarter and
better-than-expected homebuilding numbers lifted optimism in the
That's while weak manufacturing data dampened fears of
Spot gold prices slumped 2.08% to $1,397 an ounce.
SPDR Gold Shares (
), tracking about a 10th of an ounce of bullion, slipped 2.31% to
134.63 -- a one-month low -- in heavy volume.
Market Vectors Gold Miners ETF (
) slid 4.56% to 27.40.
Market watchers said pre-placed sell orders, known as stop
losses, were triggered when gold broke $1,400 an ounce, giving
way to more selling.
PowerShares DB U.S.Dollar Index Bullish (
), measuring the greenback against a basket of major foreign
currencies, climbed 0.27% to 22.79 as the euro weakened following
the European Union statistics office reporting the 17-country
bloc is now in its longest recession ever. First-quarter gross
domestic product contracted 0.2% over the prior quarter, with
France joining the list of nine EU countries in recession.
In the U.S., the National Association of Homebuilders/Wells
Fargo housing market index registered 44 in May, eclipsing
consensus expectations of 43. It rose from April's reading of 41
and significantly progressed from 28 a year ago and 16 two years
Industrial production fell 0.5% month to month in April, which
was worse than the 0.2% decline forecast and the 0.3% uptick seen
in March. The data lifted expectations for deflation, an enemy
The gold cheering squad contends trading in the futures market
is artificially depressing prices, while epic demand for physical
gold is letting sellers unload coins and bars at a premium above
"Major banks are selling excessively more bullion on paper
than they have to deliver," Terry Sacka, chief strategist at
bullion dealer Cornerstone Asset Metals, said in an email. "If
just 10% of the contracts in the futures market stood for
delivery, the exchange would default."
Premiums over spot prices for American Eagle coins are
averaging 22% at his shop, he said.
Smart Money Bullish?
The CFTC's Commitments of Traders data show commercial traders
-- the so-called smart money -- hold historically low short
positions in both gold and silver, suggesting they are heavily
bullish. The speculators -- the so-called dumb money who are
usually wrong -- are even more bearish than they were at gold's
"Really low readings like this are associated with important
bottoms for gold prices," Tom McClellan, editor of "The McClellan
Market Report," said in an email.
have bled assets on all but one day in the past month, TrimTabs
data show. Investors pulled out $519 million, or 0.7% of total
assets, in the past week and $5.2 billion, 8% of assets, in the