Gold and silver plunge to lowest levels in three years

All that glitters currently is neither gold nor silver, as both precious metals have sunk to their lowest levels in nearly three years.

The chief culprit has been the impending slowing down of the United States Federal Reserve's massive money-printing programme.

Gold prices are expected to fall further, said experts, as the US dollar is tipped to strengthen and the economy there recovers.

Traditionally, gold's lustre comes from investors seeing it as a safe refuge during times of global economic uncertainty, and as a guard against inflation.

Gold and silver fell to their lowest levels since September 2010 after the Federal Reserve signalled it is getting closer to reducing monetary stimulus as the economy recovers.

Gold for immediate delivery fell as much as 1.2 per cent to US$1,269.46 (S$ 1,623.18) an ounce yesterday - the cheapest since September 2010 - after sinking more than 5 per cent overnight in one of its worst routs since the 2008 global financial crisis.

The glittery metal has dived more than 20 per cent this year, and is staring at its sharpest annual slump since 1981.

ABN Amro noted: "Fears of a slow world economic recovery in conjunction with less stimulus also left their mark on precious metal prices."

It even fell below ABN Amro's year-end target of US$1,300, which earlier this year still looked "very aggressive", the Dutch bank noted.

Silver also saw a torrid slide, falling to US$19.399 an ounce - its lowest since 2010, and a 10 per cent tumble this week.

CMC Markets analyst Desmond Chua said: "Commodities were the biggest losers overnight as they face a stiff sell-off from multiple factors emerging from global powerhouses."

The prospect of further US economic recovery and investors favouring riskier assets such as stocks have taken the sparkle off gold in recent months.

In April, the precious metal was dumped due to weak China growth data and reports that Cyprus was planning to sell part of its bullion reserves to pay down debt.

At the start of this month, gold was hovering at around US$1,400. With the metal slipping below the US$1,300 level, it is expected to drop even more.

ABN Amro noted: "The prospect of higher US yields, a stronger US dollar and a faster economic recovery in the US should continue to be unsupportive to gold prices."

Barclays Capital analyst Kevin Norrish said: "Gold prices are likely to remain under pressure due to the huge overhang of investments accumulated over the past few years by institutional and retail investors."

Renowned commodities investor Jim Rogers has been staying clear of gold despite its tumble so far this year.

He said at a conference in Kuala Lumpur last week that he was not buying gold yet as the market needed a correction and has not hit a firm bottom.

However, goldsmiths here have been seeing more brisk business as the price tumbles.

Ho Bee Goldsmith and Jewellery business manager Jessica Chia has seen a 30 per cent to 40 per cent increase in retail sales from March to this month compared with the same period last year.

She said: "Yesterday, a lot of regular customers called and some came down to purchase gold despite the haze."

Additional reporting by Rachael Boon