By Allen Sykora Of DOW JONES NEWSWIRES
Gold futures fell Tuesday in reaction to at least a temporary stabilization of the euro and stock-index futures.
The single European currency rose in the absence of any new negative developments in the euro-zone sovereign debt crisis, in turn alleviating some of the concerns that the issue will become a drain on the economy. The calmer trading environment allowed stocks to rise, and the moves in these markets meant an abatement of the safe-haven buying that boosted gold to its all-time high late last week.
Around 10:15 a.m. EDT (1415 GMT), gold for June delivery on the Comex division of the New York Mercantile Exchange fell $10.50, or 0.9%, to $1,217.60 an ounce.
"With the euro holding on and stocks trading higher, you're seeing a little bit more appetite for risk and a little bit of the safe-haven trade coming off of gold," said Charles Nedoss, senior market strategist with Olympus Futures in Chicago.
Still, traders said the improved appetite for risk at the moment may not last and the euro may come under pressure again. That would mean a resumption of buying of gold as investors look for a safe place to park their money.
The metal, which had been on an upward trend for several years, ran to record highs late last week on safe-haven buying by investors worried about the economic fallout from the debt problems of a number of European nations. The metal kept rising despite a $1 trillion rescue plan for debt-strapped European countries. Some said this liquidity added to the potential for inflation.
Since the debt issues have not gone away, there is potential for gold to eventually push to still higher records, analysts said.
"By no means do I think that the rally is over," Nedoss said.
The area around $1,200 should offer "substantial support," said Afshin Nabavi, head of trading at MKS Finance in Geneva. Despite the price retreat, he commented that the mood among traders and investors remains positive.
"If we don't have any concrete good news out of the euro zone, the safe-haven element of gold will remain," Nabavi said.
Hedge fund manager John Paulson maintained his bets on rising gold prices during the first quarter, according to a disclosure on Securities and Exchange Commission Form 13-F. He kept all 31.5 million shares of the SPDR Gold Trust (GLD) and kept his equity stakes in gold companies.
A month ago, there had been some conjecture in the market that perhaps he would liquidate some of his positions in the metal after news that the SEC was charging Goldman Sachs with fraud. Paulson had paid Goldman to create mortgage-related securities that he wanted to bet against, but he was not charged in the case.
-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com
