Spot gold prices crash 9,could see worst week in 30 years

Spot gold - down nearly 9 percent this week - dropped for the fifth straight session.

Gold prices fell to a three-year low on Friday and was in danger of recording its biggest weekly drop in 30 years after the US Federal Reserve said it would wind down its bullion-friendly stimulus later this year.

Spot gold 8211; down nearly 9 percent this week 8211; dropped for the fifth straight session,while Comex gold futures also declined over 1 percent to their lowest in three years.

Fed Chairman Ben Bernanke said on Wednesday the central bank would taper its 85 billion monthly bond buying programme as the U.S. economy was recovering strongly,ending purchases around mid-2014 if economic growth held up.

8220;What the market is undergoing now is a state of normalization,going back to pre-stimulus times,8221; said Joyce Liu,investment analyst at Phillip Futures in Singapore.

8220;Since the first stimulus programme in 2009,markets have jumped despite fundamentals not justifying such a spike.8221;

Gold was also hurt by CME Group Inc8217;s move to raise initial margins for Comex gold after prices plunged over 6 percent on Thursday.

The exchange operator raised Comex 100 Gold Futures initial margins for speculators by 25 percent to 8,800 per contract from 7,040.

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8220;That is definitely affecting gold too. For those who cannot put out margin calls on time,they will be squeezed out even when they don8217;t want to get out,8221; said Liu.

Until recently,gold 8211; seen as a hedge against inflation 8211; had gained as the global economy took a hit and central banks acted to boost their economies. Gold touched an all-time high of 1,920.30 in 2011.

Spot gold was down 0.5 percent at 1,271.16 an ounce by 0121 GMT on Friday. The metal fell to 1,269.04 earlier 8211; its lowest since September 2010 and a level which would mark the worst weekly decline in 30 years.

It has lost 24 percent of its value this year,after recording 12 years of gains.

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Gold is on weak technical ground and will fall below 1,200 an ounce before finding support,technical analysts said.

UBS lowered its 2013 gold price outlook by 10 percent to 1,440 an ounce,and its 2014 forecast to 1,325 an ounce from 1,625.

SPDR Gold Trust,the world8217;s largest gold-backed exchange-traded fund,said its holdings fell 0.42 percent to 995.35 tonnes on Thursday 8211; the lowest in more than four years.

But the drop in prices could see a spurt in physical demand in top consumers India and China,which have been quiet recently.

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However,Liu said the demand would not be as strong as April when gold prices fell the most in 30 years over just two days.