Gold prices slide on margin move

Gold prices tumbled yesterday as investors rushed to secure gains from the recent rally that took the metal to a high of $1,911.45 per ounce in early August.

The slump was triggered by the Chicago Mercantile Exchange's decision overnight to raise gold-trading margins for the second time this month. The move, which saw the exchange raise the margins on gold futures by around 27 per cent, the biggest increase in more than two-and-a-half years, meant that investors had to make bigger deposits when placing bets on the future direction of the gold price. The result was a bout of profit-taking as investors cashed in, driving gold down as low as $1,702.44 per ounce yesterday.

"When margin requirements rise, this makes gold more expensive to hold, so there can be a sharp sell-off," Forex.com research director Kathleen Brooks said.

Gold was also undermined by speculation about whether or not the US Federal Reserve would renew its programme of pumping money into the US economy.