This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Gold Prices Plummet as Stocks Rise

NEW YORK (TheStreet ) -- Gold prices tanked Wednesday, down more than $150 in two days, as durable goods orders jumped in July and gold investors rushed for the exits.

Gold for December delivery plummeted $104 to close at $1,757.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,856.80 and as low as $1,761.10 during Tuesday's session, while the spot gold price was down $66.80, according to Kitco's gold index.

Silver prices sank $3.12 to settle at $39.16 an ounce. The U.S. dollar index was up 0.20% at $74.02 while the euro was down 0.09% vs. the dollar.

Gold prices, already at elevated levels, tumbled after orders for durable goods surged 4% in July. Excluding transportation, orders climbed 0.7%, with both numbers well above expectations. With macro data and growth prospects weak of late, the positive reading was a surprise and gave investors confidence to take profits in gold.



Gold was extremely overbought, rallying more than $300 in a little more than a month, and most experts were calling for a correction. This one came fast and furious. Gold also sank Tuesday falling as much as $80 from its intraday high of $1,917 an ounce, as worries over margin hikes hit markets and as investors opted for stocks. The Dow Jones Industrial Average rose more than 300 points on Tuesday, an uptrend which tentatively continued today.

Concerns that the Chicago Mercantile Exchange could raise the cost of purchasing an 100 ounce futures contract were still rattling gold prices a day after the Shanghai Gold Exchange raised margins by 1%.

George Gero, senior vice president at RBC Capital Markets, said that sell-stops, where traders are forced to sell positions, were triggered at $1,850, $1,825 and $1,800, which accelerated the selling. "The rapid selling did not counter ready buyers in an already overbought technical picture."

David Banister, chief investment strategist at ActiveTradingPartners.com, who said that gold could pivot at $1,907 an ounce, says the big support level is at $1,620 an ounce. "This is only year 10 in a 13-year bull cycle, Banister says, there are "still 3 years left, but this should be a multi-month consolidation."

Lower prices should bring out the physical gold buyers. In early trading on Wednesday, the physical market found some support particularly from India, as reported by Commerzbank.

"The price slump has obviously been used for physical buying, as confirmed by the Bombay Bullion Association, which estimates that precisely such price falls are increasingly being used for physical buying ahead of the festival season in India."

Over the past 11 years the gold price has averaged an 11% gain from mid-August through the end of December, mainly because the fall is a seasonally strong buying period. There is an array of festivals in India which gives consumers a reason to buy gold.

Commerzbank also said that Kazakhstan's central bank will buy the country's gold production -- 30 tons last year -- that otherwise would be exported. Although the country isn't a huge exporter, it underscores the trend that central banks are continuing to buy, not sell, gold, adding a key demand factor to the market. "The price of gold should initially sustain its upward trend," said the note.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs