Gold futures raised eyebrows Wednesday by not advancing to record prices.
Since Friday of last week, when the U.S. credit rating was downgraded by Standard & Poor's from AAA to AA+, the precious metal has skyrocketed in value. It passed two benchmark prices: $1,700 per troy ounce and $1,800 per troy ounce.
But on Thursday, bullion backtracked, which one industry observer attributed to the precious metal returning to earth after its epic rise into unprecedented values was overdone.
Bullion was "overextended to an extent that requires a setback," senior manager Ole Hansen of Saxo Bank told Reuters.
But, at the same time, the fierce climb that gold futures achieved was a marvel to watch – despite the fact that it came as a result of lack of confidence in the markets. The gains also are attributable to speculation about the sovereign debt crisis widening to ensnare one of the nations hosting a stronger European economy.
"The acceleration in the gains in the gold price underscores just how nervous the financial markets are of the recent run of events both and more recently with regards to stability in Spain, Italy and now France," Ross Norman, chief executive of bullion brokers Sharps Pixley, told Reuters.
The record price for the yellowish metal presently is $1,813.79 per troy ounce, which was set Wednesday partially on the strength of worries about France becoming entangled in the sovereign debt crisis, MarketWatch reports. Trailing only Germany as the European Union's most vibrant economy, France might find some of its banks are exposed to debt tearing through at least some of the five core nations struggling with sovereign debt.
Known as the PIIGS, the nations are Portugal, Ireland, Italy, Greece and Spain. Greece and Ireland already have accepted bailout aid and Greece was approved for a second bailout so it could effect repayments of the first rescue.
Known as both the "volatile" and the "devil's" metal, silver was on the brink of passing two significant milestones last seen in January 1980: the $50 per troy ounce psychological barrier and the record high of $50.35 per troy ounce. During the first two weeks of May, silver led the commodities market crash and lost 25 percent of its value.
Having needed three days to scale from $1,700 per troy ounce to $1,800 per troy ounce, gold futures dropped from the all-time high price of $1,813.79 per troy ounce on Wednesday to as low as $1,736 per troy ounce on Thursday, which was the price at 2:21 p.m. That value loss represented a 2.71 percent reduction.
One strategist told The Financial Times that the precious metal's service as a haven asset was temporarily offset by equities' bounce back.
"The recovery in equities appears to be reducing safe haven flow in gold," James Steel, precious metals strategist at HSBC in New York, told the publication. "I sense there’s a bit of battle fatigue in the market as well."
Despite the drawdown, gold futures continue an unprecedented run of success. For 10 straight years, the precious metal has achieved annual increases and is driving toward its 11th straight year of annual gains.
Senior market strategist Charles Nedoss told MarketWatch he still believes in gold. The employee of Olympus Futures, a Chicago outfit, said he anticipates gold futures to reverse course from the losses and resume gaining.
Nedoss' prediction to MarketWatch: By the end of 2011, gold futures will be around $2,000 per troy ounce.
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