Gold drops to 34-mth low as precious metals slide on Fed view

London, June 26. Gold today plunged to a 34-month low, its record quarterly drop as improving US economic data strengthened the case for the Federal Reserve to reduce stimulus. Gold fell 4.2 per cent to USD 1,224.18 an ounce, the lowest since August 24, 2010 and silver slid 6.1 per cent to USD 18.45 an ounce, the lowest since August 2010. Gold dropped 23 per cent this quarter, heading for its biggest loss since 1920. Fed Chairman Ben S Bernanke said last week the central bank may slow its asset-purchase program this year if the economy continues to improve. US durable-goods orders rose more than expected, home sales advanced to the highest in almost five years and consumer confidence climbed, data showed yesterday. About USD 60 billion was wiped from the value of precious metals exchange-traded product holdings this year as some investors lost faith in them as a store of value and speculation grew that the Fed will taper debt-buying that helped gold cap a 12-year bull run last year. A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver and palladium, which are used more than gold in industry. Gold entered a bear market in April, extending the retreat from its all-time high of USD 1,921.15 in September 2011. Analysts from Morgan Stanley to Credit Suisse Group and Goldman Sachs trimmed gold forecasts this week, with Morgan Stanley saying that waning investor interest has turned more serious amid a clearer outlook for when the Fed may withdraw stimulus. Silver is 34 per cent lower this quarter, set for the biggest such drop since the start of 1980. It’s the worst performer this year on the Standard and Poor GSCI gauge of 24 commodities. The index is down 5.8 per cent this year, partly on concern that growth may slow in China. Assets in the SPDR Gold Trust, the largest bullion-backed ETP, fell 16.2 tonnes to 969.5 tonnes yesterday, the lowest since February 2009. Global holdings are at their lowest since June 2010.