Gold Futures Decline; Rally 'Out of Gas'
Source: Bloomberg, Pham-Duy Nguyen (6/2/10)
"The Forex market is confused."
Yesterday, the metal reached $1,230.60/oz. in New York, within 1.6% of the record high set last month. The dollar rose for the fourth straight session against a basket of six currencies, eroding the appeal of some commodities.
"The gold rally has run out of gas," said LaSalle Futures Trader Group Matt Zeman, "People want to buy gold on sale. You don't see people jumping into the market when gold is screaming higher."
Gold futures for August delivery fell $1.70, or 0.1%, to $1,225.20/oz. at 12:04 p.m. on the Comex. Earlier, the metal dropped as much as 1%. The all-time high on May 14 was $1,249.70.
Some investors may be reluctant to purchase gold because of losses this year in other markets. The S&P500 Index dropped 4% this year, and the Reuters/Jefferies CRB Index of 19 raw materials slumped 11%.
"There's a lot of uncertainty in equity markets, so people are going to hang on to their cash in case they need to cover positions," Zeman said.
"The Forex market is confused," said Dennis Gartman of the Gartman Letter, who also has recommended holding gold priced in euros and sterling.
Demand for gold coins and holdings in exchange-traded funds backed by bullion have surged on Europe's sovereign-debt concerns.
Holdings in the SPDR Gold Trust, the biggest ETF backed by bullion, rose to a record 1,268.23 tons yesterday. The U.S. Mint sold 190,000 ounces of American Eagle gold bullion coins last month, the most since December.
Silver futures for July delivery fell 27.6 cents, or 1.5%, to $18.275/oz. on the Comex.
Platinum futures for July delivery were little changed at $1,549.90/oz. on the NYMEX.
Palladium futures for September delivery declined $6.50, or 1.4%, to $455.65/oz.