(MENAFN- FxPro) Gold prices dipped in Asia on Tuesday as markets in Japan re-opened after a holiday with investors braced for volatility, though a pinpoint reason for yesterday's sharp plunge in the yellow metal during regional trade has not been identified.
On the Comex division of the New York Mercantile Exchange, gold for August delivery fell 0.74% to $1,098.60.
Silver for September delivery fell 0.75% to $14.648 a troy ounce. Copper for September delivery gained 0.11% to $2.475 a pound.
The Bank of Japan board was largely in agreement that prices will rise in the longer term, though one member said it would show up moderately in consumer inflation, according to minutes of the June monetary policy meeting released on Tuesday.
However, other members said the impact of the quantitative easing to buy ¥80 trillion of mostly government bonds annually has had a big impact on the economy and higher prices are spreading and are also driven by higher wages.
Board member Takahide Kiuchi has been the lone dissenter in recent reviews by the nine-member board, calling for the easing program to be scaled back to ¥45 trillion.
Later, the BoJ will release a speech by Governor Haruhiko Kuroda at the Amartya Sen Lecture in Bangkok hosted by Cambridge Society of Thailand at
2215 (1315 GMT).
Overnight, gold futures crashed below $1,100 an ounce plummeting to a five-year low amid a sell-off in Asian markets, before paring some of the gains in U.S. afternoon trading.
Gold plunged more than 5% in mere minutes during early morning Asian trade when it fell below $1,120, triggering a fresh batch of sell orders.
Reuters said in a one-minute period shortly after the Shanghai Gold Exchange opened on Monday, the most-active U.S. gold futures contract crashed down $48 to as low as $1,080 per ounce, its weakest since February 2010.
Within two minutes, an estimated 33 tonnes of gold in Shanghai and New York worth $1.3 billion changed hands. A lack of liquidity, with Japanese markets closed for a holiday, hastened the slide.
Over the weekend, the Chinese government tightened regulations on Internet financing in further efforts to bolster its crashing equities markets. In recent weeks, Chinese investors have lost approximately $3 trillion in the stock market amid the slowest growth in the world's second-largest economy in over a decade.
While the People's Bank of China has looked to jumpstart equities by cutting its benchmark interest rate, easing regulations on margin trading and lowering the amounts Chinese banks must hold on reserves, the stimulus measures have only temporarily slowed the massive rout. China is the world's largest producer of gold and the second-largest consumer behind India.
On Friday, strong U.S. inflation data bolstered the case for a 2015 interest rate hike by the Federal Reserve. In a monthly report, the U.S. Department of Labor's Bureau of Labor Statistics said its Consumer Price Index (CPI) for June rose by 0.3% on a monthly basis, in line with consensus estimates. On a year-over-year basis, the CPI gained 0.1% above analysts' forecasts for a flat reading.
A reading of Core CPI, which strips out food and energy prices, provided even more optimism for the hawks at the Fed in favor of a September rate hike. The core reading, which the Fed believes provides a more accurate gauge of inflation, rose 0.2% from May and 1.8% over the last 12 months. The U.S. central bank would like to see inflation move toward its targeted goal of 2% over a long-term basis before it raises its benchmark Federal Funds Rate for the first time in nearly a decade.
Earlier last week, Fed chair Janet Yellen reiterated that conditions in the economy are likely to justify an interest rate hike at some point this year.
Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in periods of rising interest rates.
Elsewhere, banks throughout Greece reopened on Monday after more than two weeks of closures. In addition, the cash-strapped nation repaid a ‚¬4.2 billion obligation to the European Central Bank days after receiving more than ‚¬7 billion in bridge funding from its euro zone creditors. The declining probability of a Greek exit from the euro, weighs on gold which is viewed as a safe-haven for investors.
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