MW: Gold finds firmer footing as other assets crater
By Claudia Assis & Kate Gibson, MarketWatch
SAN FRANCISCO (MarketWatch) -- Gold prices found firmer ground as Tuesday's session progressed, posting gains for a second day as tensions on the Korean peninsula sparked selloffs in stocks and other commodities such as oil.
Gold for June delivery, the most active contract, rose $4.10, or 0.3%, to $1,198.80 an ounce on the Comex division of the New York Mercantile Exchange.
"Gold is in one of the strongest technical positions among all asset classes amid all this volatility," said Richard Ross, a technical analyst with Auerbach Grayson in New York.
Rising tensions on the Korean peninsula sent stock markets roiling worldwide, with the Dow Jones Industrial Average (DJIA 9,873, -193.70, -1.92%) falling below 10,000 for the first time since February. Read more about U.S. stocks.
Oil lost nearly 3% and the geopolitical concerns spurred a flight to the dollar.
North Korea's Kim Jong-il has reportedly ordered the North Korean security agencies and the all-civilian People's Army to be ready for combat.
Political tensions between North and South Korea have risen since a team of international investigators concluded that Pyongyang was to blame for the deadly sinking of a South Korean naval warship in March.
The dollar index (DXY 87.06, +0.85, +0.99%) , which stacks up the greenback against a basket of six currencies, rose 1.1% to 87.12.
Geopolitical tensions on "the Korean peninsula also have to be viewed with increasing alarm given how unpredictable and paranoid the North Koreans can be," MF Global analysts said in a report to clients on Tuesday.
Gold prices are about $45 below a record of $1,243.10 hit May 12. The pullback just provided "an excellent entry point" for buyers as uncertainty surrounding a potential sovereign debt crisis in Europe and the more recent concerns with the Koreas, Ross said.
If gold closes above $1,200-$1,210 in the next few days "we have clear air between $1,250 and a re-test of the previous record," he added.
Safe-haven buying "remains robust and supports interest in the metal," analysts at Barclays Capital said in a note to clients Tuesday.
Coin sales have also been strong, as U.S. Mint data show gold coin sales have reached 158,000 ounces May, already more than double year-ago levels, they added.
Holdings in the SPDR Gold Trust (GLD 117.23, +0.39, +0.34%) , the largest exchange-traded fund backed by gold, posted a fresh record on Monday, according to information on its Web site. The fund holds 1,237 metric tons (1,363.55 short tons) of gold.
Bullion prices wobbled earlier Tuesday and turned higher following a report that showed a drop in U.S. home prices in March.
The Standard & Poor's Case-Shiller home price index fell 0.5% in March in 20 U.S. major cities. Prices were up 2.3% in the past year, however, the second consecutive gain.
Gold rose $17.90, or 1.5%, to end at $1,194 an ounce on Monday.
During the weekend, Spain seized a small savings bank, CajaSur, offering an example of what euro-zone governments are contending with as they try to stem a debt crisis.
