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.
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