Gold Falters As Haven While Optimism Rises
Source: Wall Street Journal, Matt Whittaker (6/9/10)
Report on Chinese export gains eased some of the fear.
Most-actively traded gold, for August delivery, fell fell $15.70, or 1.3%, to settle at $1,229.90 an ounce.
Fears of a global economic slowdown tied to problems with debt-ridden European countries like Greece, Spain, Portugal and Hungary have boosted gold in recent weeks, culminating in a benchmark record settlement of $1,245.60 Tuesday.
Gold has also been hitting records when priced in other currencies like the euro and sterling, indicating a widespread safe-haven and alternative-currency appeal among investors. The metal is often seen holding its value better than other types of investments in times of economic and political uncertainty.
But the level of anxiety fell somewhat Wednesday, with U.S. equities, industrial metals, the euro and growth-sensitive currencies gaining against the dollar after a Reuters report said Chinese exports surged about 50% in May and Federal Reserve Chairman Ben Bernanke said the U.S. economy should continue to grow in 2010 and 2011.
With those jitters abating Wednesday, safe-haven demand for the metal fell, creating an opportunity for some to book profits from recent gains. Further, the $1,250 level is once again proving a resistance area.
"We've seen such a huge move that traders are just booking profits," said Larry Young, senior portfolio manager with Covenant Trading in Chicago.
Because much of gold's runup recently has been exacerbated by speculators, that leaves the market more vulnerable to quick pullbacks, Young said. He believes market participants remain bullish on the metal.
Meanwhile, metals that are primarily used in industry rose on the optimism stemming from the Chinese news and the Bernanke comments.