Gold and silver dropped to their lowest level since 2010 on Friday amid the surge of the dollar against the yen and other major currencies after the Bank of Japan reported that it would expand its stimulus spending, thus shocking global financial markets.
Spot gold traded below $1,180 per ounce, the level bullion had reached twice during the last major sell-offs of June and December 2013. It has held the mark earlier this month before Friday’s decline.
The yen dropped to a low of almost seven years against the US dollar on Friday, as reported by Reuters. This puts the yen on track for the worst day in 18 months.
Sica Wealth Management president and chief investment officer, Jeffrey Sica said, “The main reason for gold’s fall is the strength in the dollar after the BOJ’s desperate efforts to weaken the yen.”
Sica added, “Gold could fall further in the short term as the dollar could rise more in the short term, but gold should eventually benefit as a hedge against the uncertainties and economic turmoil brought by central-bank actions.”
Spot gold dropped as much as 3% to the lowest level since July 2010 at $1,161.25 per ounce in earlier trading. It was down 2.8% at $1,165.50 later.
US Comex gold futures dropped $33.50 per ounce at $1,165.10.
Gold and silver are facing heat after the US Federal Reserve dismissed financial market volatility earlier in the week as factors that could undercut the progress towards its inflation and unemployment goals.
According to The Wall Street Journal, the rocketing dollar makes gold expensive for foreign buyers, thus dulling the allure of the metal.
Senior market strategist with Archer Financial Services, Adam Klopfenstein said, “Gold took this as a negative event. The US is moving in a different direction to Japan and our currency is strengthening versus the Japanese yen as a result.”
Spot silver dropped 4% to the lowest since February 2010 at 15.76 per ounce and was poised for a fourth monthly decline in a row. It dropped 3.1% at $15.88.
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