China's offloading of 33 tonnes of gold in two minutes in Shanghai has pushed global gold spot prices to a five-year low - raising $US1.3billion ($NZ1.97billion) for the Chinese Government.
The price plunged 4.5% from $US1132 to briefly touch $US1081, and by noon yesterday New Zealand time had retraced some losses to trade around $US1098.
Oceana Gold (OGC) shares have been hammered since the sell-off, and the price plunge bodes ill for open-pit operations in Reefton, on the West Coast.
Gold is normally the safe haven in times of global turmoil, but with expectations the US central bank, the Federal Reserve, will raise its interest rates, and with a strengthening US dollar, investors have been holding out for better interest rates.
New Zealand's largest gold producer, OGC in East Otago, expects to produce up to 335,000 oz this calendar year, or about 9.5 tonnes of gold.
Gold prices below $US1200 bring into sharp focus the ability of gold producers to maintain their profit margins, with smaller operators forced to mothball or close mines.
While OGC is well placed to ride out price dips, as sales of its copper by-product from its northern Philippine mine are used to offset gold production costs across the rest of operations, its share price in recent days has been hammered.
From Friday to Monday's market close, OGC shares were down 9.4%, from $3.38 to $3.15, and after opening yesterday were down a further 6.6% at $2.94.
OGC shares were down 23c at $2.92 at the end of trade yesterday.
Craigs Investment Partners broker Peter McIntyre said while OGC remained well placed compared with the majority of producers to ride out the plunge, its declining share price was of concern.
''A major pullback in spot prices is problematic. It plays havoc with investment intentions,'' Mr McIntyre said.
The swiftness of the decline surprised traders and resulted in two separate trade halts in US gold futures, Reuters reported.
While copper offsets for OGC can be applied across all operations, OGC has said in the past each mine must maintain its own viability against the global spot price.
While its East Otago Macraes mine could potentially be in line for a second mine life extension, the declining gold price bodes ill for Reefton on the West Coast, which remains under threat of mothballing at the end of the year.
New Zealand operations had a ''cut-off'' gold price point of about $US1250 per ounce, OGC chief executive Mick Wilkes said in March. China's official gold reserves had risen almost 60% in the past six years, according to the first official data since 2009, AFP reported yesterday.
The central People's Bank of China said bullion holdings rose from 1054 tonnes in April 2009 to 1658 tonnes at the end of June.
China, ranked fifth in global holdings, is the world's largest gold producer, but the 57% pace of increase marked a slowing in gold accumulation after holdings jumped 75% from 2003 to 2009.
