Gold futures prices slumped to their lowest level in a decade Thursday, hurt by diminishing evidence of inflation and fears that central banks will shift assets out of gold.
The price slide was accelerated by thin pre-holiday trading and a few large sell orders late in the day on the New York Mercantile Exchange.
"The market came under increased selling pressure in the last 30 minutes," said David Rinehimer, research director in New York with Smith Barney Inc. "There wasn't much buying support."
On other markets, energy futures tumbled and soybeans rallied strongly.
The gold market initially showed little reaction to news that Australia's central bank has sold 167 tons of the metal over the last six months, analysts said. But the action by the Reserve Bank of Australia underlined a concern that has been in the market for months.
"There has been speculation that there is a longer-term trend of European central banks reducing the amount of gold in their reserves and putting their money in more productive assets," Rinehimer said.
In fact, he said, the amount of gold sold last year has been only a little higher than the 10-year average.
Nonetheless, he said, expectations for further selloffs by central banks are there.
Bernard Savaiko, an analyst with PaineWebber Inc., said the movement to market economies in formerly authoritarian countries also is undermining gold prices.
In these countries, he said, "investors looked to gold because there was no other investment opportunity."
With a more open economy and thriving stock markets around the world, money is flowing to equities and other investments at the expense of gold.
Gold also was pressured after the Labor Department reported a surprising increase in the U.S unemployment rate for June. The report marked the latest sign that the American economy is slowing and inflationary pressure is benign. Gold historically has been viewed as an inflation hedge.
Gold futures for delivery in August reached an intraday low of $324 an ounce, the lowest level since 1986, before settling at $325.20, down $7.10.
Energy futures prices tumbled on the New York Mercantile Exchange on a report that Iraq was close to submitting its oil-for-aid distribution plan to the United Nations. The U.N. later said through a spokesman that it's unclear when Iraq will present the plan.
Nonetheless, the tenor of the market was set by the first report, said Gerald E. Samuels, managing director of ARB Oil Inc.
Light sweet crude oil for delivery in August settled 78 cents lower at $19.56 a barrel, August heating oils was down 2.16 cents at 52.76 cents a gallon and unleaded gasoline for August delivery was down 1.37 cents at 57.92 cents a gallon.
Soybean futures prices, driven by improved exports, rallied strongly on the Chicago Board of Trade. Wheat and corn futures declined.
"Soybeans basically responded to fair exports sales" announced by the government before trading began, said William Biedermann, research director for Allendale Inc., in Crystal Lake, Ill. China was reported to have bought 250,000 tons of new crop soybeans.
With good weather over the eastern Plains states and into the Midwest, farmer were expected to make excellent progess bringing in the wheat crop over the extended holiday.
"Despite nearly a million tons of export sales (of corn and wheat) over the week, they were liquidating ahead of the weekend," Biedermann said.
Wheat for delivery in July settled 4 cents lower at $3.20 a bushel; July corn was 1/2 cents lower at $2.45¬ a bushel; July oats were 2 cents higher at $1.641/2 a bushel; and July soybeans were 101/2 cents higher at $7.211/2 a bushel.