MW: Gold dips as traders take more money off the table
By Myra P. Saefong & Nick Godt, MarketWatch
SAN FRANCISCO (MarketWatch) -- Gold futures were ready to extend their losing streak to three sessions Thursday, pressured by the overall declines in the U.S. stock market as well as by concerns that heavy selling by hedge funds is set to resume once global bans on short-selling expires.
"We will not see a huge increase in the price of gold until the financial markets stabilize a bit," said David Beahm, a vice president at precious metals retailer Blanchard & Co. "Until then, investors will continue to hide dollars in their backyards."
Gold for December delivery was down $5 at $713.30 an ounce in electronic trading on Globex. It climbed as much as $7 earlier in the session to trade as high as $725.90.
On the Comex division of the New York Mercantile Exchange, the contract has lost more than $28 over the past two sessions and was poised to extend its losing streak.
Traders "learned that hedge funds lost a further $100 billion in assets last month," said Jon Nadler, a senior analyst at Kitco Bullion Dealers.
"While some funds have halted redemptions, the expectation is that when the bans are lifted, the selling will resume," he wrote in a note.
The precious metal had posted some gains in electronic trade after news that the German economy, the largest of the euro zone, is now in recession. See full story. In Japan, the Nikkei fell sharply and more worrisome trends were revealed in U.S. weekly jobless claims. See full story.
"We received additional news about the global recession, as Germany declared the country is in a recession," said Beahm, in emailed comments. "As the economic crisis sweeps the globe, the only option that central banks will have to save their economies will be to dump liquidity into the markets."
And "as inflation rises across the world, investors will be looking for portfolio protection," he said. "Gold will be the asset that protects and builds wealth during this period of what could be hyper-inflation."
For now, safe-haven flows into gold were restrained as shares on Wall Street traded mainly lower after three days of losses. See Market Snapshot.
On Globex Thursday, other metals headed lower along with gold.
December silver fell 34.5 cents, or 3.6%, to $9.135 an ounce, while January platinum lost $1.10 to $824 an ounce and December palladium fell $1.10 to $214.90 an ounce. December copper was at $1.642 a pound, down 1.1 cents.
Metals equities traded mainly higher, with the Amex Gold Bugs Index , which tracks the share prices of major gold companies, up 1.3% at 177.71.
The iShares Gold Trust added 0.2% to $70.46 and the Market Vectors-Gold Miners ETF also rose, climbing 1.1% to $19.61. But the iShares Silver Trust ETF lost 1.3% to $9.049.
