After New High, Gold Dips on Profit-Taking
Source: The Wall Street Journal, Allen Sykora (5/14/10)
"Everybody in Europe started to take profits."
Previously, the metal continued its record-breaking run, bucking positive economic data from the U.S. on continued worries about possible long-term implications of Europe's rescue package.
Gold futures hit a fresh intraday all-time record high of $1,249.70 in early trading.
Since, however, the most actively traded contract, for June delivery, fell back to $1,226/oz. on the Comex. It was down $3.20, or 0.3%, for the day.
RBC Capital Markets Global Futures' George Gero attributed the retreat largely to traders, who previously bought, now selling in order to capture their profits ahead of a weekend.
Otherwise, the general market jitters that had boosted gold are still in place, as evidenced by the Dow Jones Industrial Average being lower by triple digits, he said.
Some of the selling may have been encouraged by gold's inability to penetrate above $1,250, which had emerged as technical resistance, said Leonard Kaplan, president of Prospector Asset Management.
"Everybody in Europe started to take profits," he said.
Previously, the rise in gold, which this week breached record highs set in December, came during a selloff in U.S. equities and other commodity futures such as crude oil, and the euro. Investors were turning to gold as a haven, a place where value is likely to be preserved in times of turmoil.
Investors have dispensed with the idea that gold and the dollar should trade in opposing directions, as the two have done over the past several years in an environment of dollar depreciation.
"Both have been moving higher in tandem due to their appeal as safe-haven assets," Barclays said in a note.
In addition to hitting new record highs in dollar terms, gold also hit highs in euros, sterling and Swiss francs.