Gold drops almost $34 to trade near 1-month low
Copper prices sink as much as 9% to lead a broad decline in metals

Last Update: 12:07 PM ET May 24, 2006

SAN FRANCISCO -- Gold futures tumbled almost $34 an ounce, or 5%, Wednesday to touch a nearly one-month low as stronger-than-expected new-home sales fueled a rise in the U.S. dollar and damped investment demand for precious metals.
Gold, which is widely viewed as a hedge against inflation as well as an alternative investment, was also weighed down by concern about valuation and declining retail demand.
"The gold market once again caved in," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"Investors (mostly of the smaller, retail variety) appear to prefer loading up on more [gold] only if they perceive that the correction has run its full course or if prices are at truly bargain-basement levels (say from $580 to $620)," he said.
So for now, "we still cannot rule out the possibility (now becoming more of a probability) of executing a full (or very close to full) 50% retracement of the $300 move achieved by gold during the past year," he said. And that would bring gold "very near the high 500s or low 600s."
At last check, gold for June delivery plunged $31.70, or 4.7%, to $642 an ounce on the New York Mercantile Exchange. It had been down as much as $33.70 earlier in the session to touch a $640 low -- an intraday level not seen since April 28. The almost $34 decline marked the June contract's biggest one-day drop, according to data from Thomson Financial.
Ned Schmidt, editor of the Value View Gold Report, viewed the steep drop in gold as a buying opportunity.
"When funds meet an illiquid market like gold, prices decline," he said. "That equals opportunity for real investors."
So "investors should be using this period through early next week to be buying gold."