Australia Sale Sends Gold to a 12-Year Low

Gold plunged to a near 12-year low on Thursday after Australia’s central bank said it sold 167 metric tons from its reserves.

The sale raised speculation that other central banks could also cut their holdings as gold loses its allure as a safe haven from economic and political turmoil, becoming instead just another commodity like wheat or copper.

The Reserve Bank of Australia’s sales, equivalent to about $1.784 billion based on prices before the announcement, were spread out over the last six months. Australia invested money earned from the sales in U.S., German and Japanese government bonds.

“Other central banks that have large gold reserves like the U.S. are going to ask themselves why they have so much money tied up in an asset that is declining in value,” said Jeffery Ralph, a trader at Royal Bank in Toronto.

Gold for August delivery fell $7.10 to $324.20 an ounce on the Comex division of the New York Mercantile Exchange, the lowest since December 1985. Spot gold in London inter-bank trading fell as much as $7.10 to $323.65 an ounce, also the lowest since December 1985.

The Australian sales were the latest in a series of similar moves by central banks that have been selling gold instead of keeping it in reserves as part of their monetary policy. The Netherlands said in January that it sold 300 tons of gold, or a fifth of its holdings, and Belgium said last month that it would sell a tenth of its gold.

The Australian announcement caught New York futures traders unaware, as they were packing for their move to the new Nymex trading building in New York or had taken a long holiday weekend.

“It’s the day before a holiday, when there’s very little volume and very little activity, so there was a period of delay,” said Tim Porter, an analyst at Refco Inc. in New York.

“When prices fell below $331.80, that triggered automatic selling orders by major commission houses, and everyone starting piling in,” he said.