Gold prices sank as London trade began Friday, dropping 3% and falling the 2013 crash low of $1180 per ounce to set new 4-year lows as the Dollar rose — and world stock markets leaped — following a surprise boost to Tokyo's QE program by the Bank of Japan.
Widely expected to leave the asset purchase scheme unchanged two days after the U.S. Fed halted its QE purchases, BoJ governor Haruhiko Kuroda instead raised Japan's annual quantitative easing by one third to $725 billion, citing weak inflation and falling household spending.
Japan's $1.2 trillion Government Pension Investment Fund (GPIF) — the world's biggest retirement fund manager — then said it will double its holdings of Japanese stocks to 25% of assets, and also hold a further 25% in foreign equities.
The Yen sank near 7-year lows, and the Nikkei soared more than 4%, with European stock markets then adding 2% by late afternoon in Frankfurt.
Weaker Eurozone bond prices also rose, but U.S. Treasury bonds fell.
Gold priced in Japanese Yen whipped in a 1.7% range but was unchanged by the end of Tokyo trade.
Dollar gold prices, in contrast, fell at their fastest pace since October 2013, losing the $1180 level touched twice last year and again at the start of this month — before steadying around $1165 per ounce.
London's AM Gold Fix came in at $1173.25 per ounce, the lowest London Fix since 5 May 2010, but the fall was muted to multi-month lows for U.K. and Eurozone investors as their currencies also fell against the Dollar.
Silver meantime fell to dip briefly below $16 per ounce at levels last seen in February 2010.
Silver only once fixed above $16 per ounce between 1980 and 2008 in London.
"Month-end factors [are] perhaps exacerbating the move," says one commodities analyst, contrasting the drop in precious metals prices with a strong rally in base metals after the Bank of Japan news.
[Hear: Bo Polny: November Starts the Next Upcycle for Gold]
"Too many shorts around," says another, pointing to the growing size of bearish speculative bets against gold prices in U.S. futures and options.
Turnover in Shanghai's main gold contract was the heaviest since 16 April last year, when the 2013 price crash unleashed record Chinese demand.
China's gold consumption fell 21% in the first 9 months of 2014 from the same period last year to 755 tonnes, the state-mandated China Gold Association said today.
China's gold mining output — now leading the world since 2007 — rose 14% to 352 tonnes over the same period, the CGA said.
After leading Chinese jewelry group Chow Tai Fook reported a 20% drop in same-store sales for July-September, Hong Kong-listed retail chain Tse Sui Lien today said its turnover fell 14% in the six months to August.
China's recent surge in precious metals exports is being investigated by customs officials for "round-tripping", says Yicai.com.
India's so-called "80:20 rule" — imposed last year to curb gold imports to what was the world's No.1 consumer nation — has also been abused, the Business Standard quotes un-named customs officials.
"Several cases of export of substandard or even fake gold jewelry have been unearthed," the paper quotes one source, enabling traders to import more gold — partly explaining the recent surge in India's gold imports data.
Western investment managers, meantime, "have not been too keen to participate in the gold market this year," says Swiss bank and London market-maker UBS in a note.
"There has been no big theme and price action has been uninspiringly range-bound. [So this new] downward pressure on gold is amplified by the lack of liquidity."
Shedding another 1 tonne on Thursday to 741 tonnes, the giant SPDR Gold Trust has now cut its holdings by 7% from what was a 5-year low at New Year 2014.
Last year the GLD shed 41% of the record-high 1,350 tonnes held at the start of 2013.
Japan's new QE plan, notes Bloomberg, will enable it to buy every new Yen of debt issued by the Japanese government.
