Gold leads latest dive in commodities, wiping out 2008 gain

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If you were hoping to buy gold for a lot less than $1,000 an ounce, you’re getting your chance.

But buying now may be akin to catching a falling anvil made of the stuff: It may be very easy to get hurt.

Gold has plummeted today, leading the latest sell-off in commodities as investors and traders continue to cash out of hard assets.

Near-term gold futures in New York tumbled $36.30, or 4.2%, to $821.50 an ounce. That wiped out the last of the metal’s year-to-date gains. It’s now off 2% from the Dec. 31 closing price of $838.

After last week’s dive in commodities some analysts were expecting a bounce today. But sellers still are swarming. Oil is down about 50 cents to $114.66 a barrel -- the lowest since May 1 -- despite the conflict between Russia and Georgia that is threatening supply disruptions in that region.

Within the Reuters/Jefferies CRB index of 19 major commodities, 13 are in the red today.

The surprise rally in the dollar over the last week has blown out one of the key pillars supporting raw materials prices: Many investors and traders moved into gold and other commodities in recent years to hedge against the falling dollar. With the buck resurging, the appetite for hard assets is quickly waning.

And as gold’s price falls it’s feeding on itself as traders flip to ‘shorting’ the metal, betting on further declines. ‘Traders are now very aggressive on the downside,’ said Larry Young, senior trader at Infinity Futures in Chicago. As they say in the futures pits, ‘It’s so much easier to cut a tree than to make one grow.’

Commodities trading is a lot about chart-watching, and ‘technically the gold chart looks bad,’ said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. The price has slid below its 200-day moving average, he noted.

That could take gold to between $800 and $810 an ounce in the near term, Zeman said. If it can’t hold at that level, $750 might be the next stop, he said.

But at some point, Zeman noted, gold’s plunge should bring in true investors -- particularly in India. Gold jewelry demand there normally is robust but it slumped in the first quarter of this year as the price zoomed, reaching an all-time high of $1,004.30 an ounce on March 18.

‘One of the positives is that you’re going to get the physical-gold buyer back in the market’ as prices slump, Zeman said. ‘The question is when.’