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'Pre-emptive selling' pushes gold to 4-week low

Dario Pignatelli | Bloomberg | Getty Images

Gold fell nearly 3 percent Thursday morning to a four-week low, dipping to $1325.60 an ounce.

Analysts and traders say technical momentum prompted further selling after gold broke below its 100-day moving average (around $1,359.) Also, anticipation of a possible announcement about the Fed's reduction in its bond buying program has added to the selloff.

"It's pre-emptive selling," said HSBC analyst Jim Steel. "No one knows what the Fed is going to do, but just in case, they're selling."

A change in sentiment may be underway as well. Money managers had been adding to their bullish bets on gold for four consecutive weeks, doubling their stake from early August through the first week in September.

Worries over a possible U.S. attack on Syria contributed to the "safe-haven" trade, boosting gold prices. Now that diplomacy has reduced the likelihood of a military strike,"what's really going to keep gold up?" asked COMEX floor trader Kevin Grady. "If you're long the market right now, it doesn't look like a good situation to be in."

Grady said if the Fed announces it is "tapering" its stimulus program, gold prices could fall to $1,200 an ounce.

—By CNBC's Sharon Epperson. Follow her on Twitter: @sharon_epperson

Disclaimer

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.