Futures Market News
Gold prices slump amidst flight from risky assets
Aug 20, 2010 12:05 PM
Gold futures didn't manage to resist the general rout in higher-yielding assets, leaving investors in the yellow metal disappointed. In the past few weeks, gold has alternated between positive and negative correlations with equity indexes; today, they both fell.
The spot price of gold lost $7.10 to $1,228.30 per troy ounce. Metals in general performed poorly: Silver did even worse, dropping 2.5 percent to $17.92 per troy ounce, while copper was down 1.24 percent to 329.8 cents per pound at 11:15 a.m. EST.
A significant fraction of investors view gold as a haven asset, but gold futures come under pressure when traders have to sell gold to cover losses in other sectors. In addition, weak economic figures out of the U.S. have stoked fears of deflation, driving a flight to the perceived safety of bonds.
Gold obviously performs better in an inflationary environment, which would be more likely to come about if the economy started to recover. Interest rates are at a record low, but many investors seem to be in preservation rather than growth mode. Volatility has been extraordinarily high in both equities and commodities, though sovereign bonds have not been exempt, either.
"Gold is suffering along with everything else," Frank McGhee, a dealer in Chicago, told Bloomberg News.
Don’t Miss Our News Updates!
Follow our breaking news stories and get a unique take on current events that may impact the commodity futures markets. Multiple new articles are posted each weekday. Subscribe to our commodity news updates by email, and receive real-time updates with our RSS feed, follow us on Twitter @DanielsTrading, become a fan on Facebook to stay informed.
SPECIAL OFFER: Free eBook — Gold Exposed: Spot Gold versus Gold Futures
Are you interested in trading gold futures but unsure of how to start?
Register for our FREE guide, and learn the ins and outs of the gold markets that will help answer many of your trading questions.
Register for Your Free 2-Week Trial of the dt Insider Market Advisory!
With your free trial membership, you'll receive full access to our exclusive trade recommendation service and all of the timely and accurate trade information you need to feel comfortable participating in the markets.