Thread: Gold Slips to 3-Month Low

JANUARY 25, 2011, 12:55 P.M. ET.

Gold Slips to 3-Month Low

By MATT WHITTAKER

NEW YORK—Gold futures fell to a three-month low as the dollar rose and the metal's status as a refuge continued to dim.

The most actively traded contract, for February delivery, was recently down $18.80, or 1,4%, at $1,325.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Its intraday low of $1,321.90 was the lowest price since Oct. 27.

"A lot of it is panic selling," said Bob Haberkorn, senior market strategist with Lind-Waldock in Chicago.

Gold has lost 6.7% this year as investors have gained confidence in the economy, feeling less of a need for gold as a hedge against financial turmoil and European sovereign-debt issues. Those fears had sent the metal to an intraday peak of $1,432.50 in December.

Now, the declining prices are sending shorter-term investors scurrying.

"No one knows where the bottom is going to be," Mr. Haberkorn said. "Traders are waiting to see how it reacts to that $1,320 level."

With gold already on the defensive, a strengthening U.S. dollar sparked further selling Tuesday by making dollar-denominated gold more expensive for foreign buyers, damping demand.

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Zuma Press

Gold prices have fallen as investors' confidence in the economy grows.
.The ICE Futures U.S. Dollar Index was recently up 0.4% after news that U.S. home prices fell in November from a month earlier, extending a downward trend that began in August.

That left market participants continuing to search for what they see as a fair price for gold.

"Prices were too high," said Ira Epstein, director of the Ira Epstein division of the Linn Group. "The market is searching for that zone where prices come back."

Write to Matt Whittaker at Matt.Whittaker@wsj.com

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Gold Drops as Optimism Grows About the Economy

Gold, other metals fall as investors become more optimistic about the economy

The Associated Press

Prices for gold and other metals are falling as investors raise their expectations for economic growth.

Gold hit its lowest level since November, when a year-end rally took it above $1,400 an ounce. Investors have been pouring into gold futures based on fears of weak economic growth and global inflation. Gold is often used as a hedge against falling currency prices and slow growth.

Interest in gold waned on Tuesday. Gold for February delivery fell $12.20 to settle at $1,332.30.

One factor pushing gold down is the expectation that the Federal Reserve could move toward raising interest rates, said George Gero, senior vice president for RBC Wealth Management in New York. The central bank's central policy making committee is meeting this week.

"The market, with the selling, is betting that we're going to have continued recovery in the economy, and higher interest rates," Gero said. "Higher interest rates make it more expensive to hold gold, and the recovery signals that you may not need the haven in gold."

Other precious metals followed gold lower.

In March contracts, silver lost 51.6 cents to settle at $26.805 an ounce, copper fell 12.25 cents to $4.2260 a pound and palladium fell $31.80 to $784.75 an ounce. April platinum fell $32.30 to $1,787.30 an ounce.

Crude oil fell on mixed economic news and the possibility that OPEC countries will step up production.

Comments Monday by the Saudi Arabian oil minister stoked speculation of a production increase. He seemed to imply that the Saudis and other members of the Organization of the Petroleum Exporting Countries could raise production to bring down the price of oil.

Goldman Sachs analysts think it's possible that OPEC has already stepped up production. They say global demand increased in December, but oil supplies did not appear to decline at the same pace.

"It would suggest that OPEC has started to bring its spare capacity back to the market earlier than we anticipated," Goldman Sachs analysts wrote in a note to investors.

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