Kitco:
NEW YORK (TheStreet ) -- Gold prices were tanking Tuesday, falling below the $1,400 support level as the nuclear disaster in Japan unfolds.
More on Metals and Mining Midday Glance: Silver CompaniesMidday Glance: Gold CompaniesSpike To Offer 3 Previews Of 'Coal' Reality Show Market Activity Agnico-Eagle Mines| AEM Eldorado Gold Corp| EGO Kinross Gold Corporation| KGC Gold prices have shed as much as 3.5%. Investors buy gold as risk protection to sell during times of disaster and that's exactly what global markets, most heavily the Japanese, are doing.
Gold for April delivery was rising from session lows but was still sinking $32.40 to $1,392.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as low as $1,380.70 while the spot gold price was plummeting more than $35, according to Kitco's gold index.
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The list of bad headlines mounted Tuesday with investors trying to figure out what the worst case scenario for Japan could be. Prime Minister Kan announced that radiation levels near 4 exploding nuclear reactors are very high. Bank of Japan pumped another 8 trillion yen, or $98 billion, into the market. The Nikkei was down 14% during trading.
On the surface gold should be rising as a safe haven investment. However, it seems investors are using gold as currency, selling it for cash during this crisis.
China and India are by far the largest gold consumers in the world, and Japan saw fourth-quarter disinvestment fall 11 tons in 2010 as jewelry demand plummeted 31% in the same time frame, according to the World Gold Council.
But Japan still has gold to sell. Its central bank holds 765.2 tons. That is not to say the bank is selling but just that Japan still represents a big player in the market.
"I think [Japan is] unwinding a lot of carry trades," says Phil Streible, senior market strategist at Lind-Waldock. "They're selling a lot of their gold assets, their silver assets, and any other non-liquid asset, getting out of it, trying to repatriate back to Japanese yen ... cash is king right now to them."
Streible thinks that after a week, investors will have a better assessment of the damage in Japan, which might help buoy gold prices.
Köp!
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