Demand for safe-haven assets, such as gold, drops
By Polya Lesova & Myra P. Saefong, MarketWatch
FRANKFURT (MarketWatch) -- Gold futures fell nearly 2% on Monday, as the announcement of a massive financial-stabilization package by the European Union cheered investors and reduced demand for gold as a safe haven.
Gold for June delivery dropped $21.40, or 1.8%, to $1,189 an ounce in electronic trading on Globex.
The contract earlier hit an intraday low of $1,184.40 an ounce.
The European Union announced on Sunday a financial-stabilization plan worth 750 billion euros ($970 billion) aimed at restoring market confidence and stemming the spread of the sovereign-debt crisis from Greece to other euro-zone members.
In addition, the European Central Bank said it would buy euro-zone government and private bonds to ensure depth and liquidity in "dysfunctional" market segments.
The bold steps boosted investor confidence and spurred demand for assets perceived as risky such as stocks and commodities. Traders, however, sold gold, which is traditionally perceived as a safe haven.
"The increase in risk appetite could see further profit-taking," said James Moore, analyst at TheBullionDesk.com.
"However, we expect investors will remain cautious and continue to diversify their portfolio exposure, viewing dips in gold as bargain-hunting opportunities," Moore wrote in a note.
Gold prices rose 1.1% Friday to end at $1,210.40 an ounce, a five-month high, with futures closing in on the Dec. 3 all-time settlement record of $1,217.40 an ounce. See Friday's Metals Stocks column.
In a newsletter issued Monday morning, Mark Leibovit, chief market strategist for VRTrader.com, said "gold remains in a bull market and like all bull markets will at some point experience a correction -- perhaps even a sharp correction."
Elsewhere in the commodity markets, May copper futures rose 10 cents, or 3.2%, to $3.23 a pound.
Oil futures rallied 4%, boosted by the EU bailout plans. Read more on oil.
