London/Seattle: Gold dropped for the first time in seven sessions as some investors sold the metal after signs of slowing growth spurred a rally to a record $1,917.90 an ounce.
The relative-strength index of futures in New York has topped 70 since 8 August, a signal to some investors that prices were poised to decline. Bullion has jumped 15% in August, heading for the biggest monthly gain since September 1999, amid speculation that Federal Reserve Chairman Ben S. Bernanke will signal further measures to stimulate the US economy later this week and as debt crises spurred demand for haven assets.
Gold looks very bubbly, Matt Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. Gold’s going to continue to suck everybody in. There’s too much risk of a wicked correction lurking around the corner to enter the trade right now, he added.
Gold futures for December delivery fell $12.1, or 0.6%, to $1,879.80 an ounce at 10.34am on the Comex in New York. The metal for immediate delivery declined as much as 1.7% after reaching a record $1,913.50 in London.
Before Tuesday, prices surged 17% in three weeks. The metal is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify holdings away from equities and some currencies. Bullion also reached all-time highs in euros, British pounds and Swiss francs today.
Gold’s climb in the past several weeks surprised most in the market, even those in the most bullish camp, Edel Tully, an analyst at UBS AG in London, wrote in a report on Tuesday. Given the speed of the recent rally, the possibility of a correction is rising as investors look to bank profits. “Even if a $150 or more pullback were to materialize, we’d strongly view it as a good buying opportunity,” said Tully.
Holdings in bullion-backed exchange-traded products fell for a second day on Monday, sliding 4.7 tonnes to 2,206.4 tonnes, data compiled by Bloomberg show. Assets reached a record 2,216.8 tonnes on 8 August.
UBS raised its one-month gold forecast to $1,950 from $1,725 and increased its three-month outlook to $2,100 from $1,850. On Monday, the bank’s physical sales to India, the top global buyer, were the highest since 10 May, Tully said.
Bernanke is scheduled to speak on 26 August in Jackson Hole, Wyoming, at an annual conference sponsored by the Fed Bank of Kansas City.
In the long term, gold is attractive, Zeman of Kingsview said. Fiscal deficits are completely out of control. It’s no wonder that investors are losing faith in paper money.
Silver futures for December delivery fell 16.5 cents, or 0.4%, to $43.2 an ounce on Comex. Before Tuesday, prices have gained 40% this year.
Platinum futures for October delivery fell $18.7, or 1%, to $1,887 an ounce on the New York Mercantile Exchange after reaching $1,918.50, the highest since July 2008. Palladium futures for September delivery fell $1.5, or 0.2%, to $763.60 an ounce on the Nymex.