LONDON/NEW YORK (Reuters) - Gold sank more than 5 percent on Friday, entering bear-market territory as institutional investors fled bullion in favor of other safe-haven assets amid concerns about central bank sales and souring sentiment.
"There's a tremendous amount of new shorting going on in the metals market right now," said Kevin Grady, president of Phoenix Futures and Options. Grady said when gold broke through the $1,525 to $1,539 level, it unleashed a new wave of selling.
"That's where all the big stops were. The big support level will now be the huge resistance levels...I think we're going to test the 1,450 area as long as the market does not break back above those levels and run the shorts out," he said. "The shorts have the market going their way, and I don't see them getting out. Right now they control this market."
The market has been increasingly negative on gold, with Goldman Sachs making a high-profile call to short it this week. "You've had lesser open interest. In the last few months, we lost about 20 percent of our open interest and on top of that every other asset manager has moved away from gold into strong stocks. Right now the path for least resistance for gold is lower," said RBC analyst George Gero.