NEW YORK (Kitco News) -- Gold prices ended the U.S. day session solidly lower Monday and hit a five-year low of $1,080 an ounce, basis Comex futures, in Asian trading. Prices did bounce off the lows by the time U.S. trading started, but still traded solidly lower on the day. Kitco's spot gold was quoted down $30.90 at $1102.40 an ounce as of 4:03pm EDT
"The gold price is bouncing up and down and investors have to make sure they are strapped on well to enjoy the ride," said Frank Holmes, CEO of U.S. Global Investors in an interview with Kitco News Monday.
Holmes suggested it was a major player dumping gold.
"Recognize this was a $2.7 billion dollar notional value trade that hit the market about 18 months ago - last month the investigation by Comex showed it was a high frequency trade and they spanked people by slapping them on the wrist. You can do this in financial markets as long as the price of commodities falls down," he explained. Holmes added, "it is very distressful for investors but a great short term opportunity to reposition your portfolio."
Jim Wyckoff, a senior technical analyst for Kitco.com concurred that the move in gold suggests a major player was "dumping gold." He added that gold's slide started Friday, in which prices, on that day, slipped to a five-year low and produced serious near-term and longer-term technical damage.
On Friday, China's central bank reported gold reserves of 53 million ounces; up 57% from the last time it reported numbers six years ago. Many in the gold market questioned the numbers and whether China revealed its true figures. "The bearish slant here is that with China being one of the world's largest buyers of gold, the fact that official stocks are not near what was expected, further tarnishes gold's centuries-old status as a safe-haven asset," Wyckoff said. "Some are crediting this news as a major factor behind gold's big losses Monday, but I have my doubts," he added.
The further and crucial downdraft for gold started in overnight Asian trading; gold prices swiftly plummeted to the $1,080.00 level before rebounding to trade back above $1,100.00.
The rebound in the U.S. dollar index and down-trending crude oil prices in the past couple weeks have also been bearish "outside market" forces working against the precious metals bulls, Wyckoff said.
Wyckoff added he doesn't think a gold bottom has formed, but it may be "closer than people think." He explained that the key psychological level of $1,000 an ounce could be in the cards for the metal, at which point gold may find its bottom. "If history is any clue, I think we're still going to see more downside price pressure," Wyckoff said.
Looking at silver, which was able to hold on despite gold's fall, Wyckoff said the metal remains in a bear market. "September silver futures prices closed near mid-range and hit a fresh contract low today. Nearby silver futures hit an eight-month low. Silver bears have the solid overall near-term technical advantage," Wyckoff said.