Gold's three-day rally stalled Thursday as some of the recent safe-haven demand abated since worries about euro-zone debt and tensions on the Korean peninsula are not intensifying.
Around 9:02 a.m. EDT (1302 GMT), gold for June delivery on the Comex division of the New York Mercantile Exchange fell $3.90, or 0.3%, to $1,209.50 an ounce. August gold, the contract month with the most open positions, slid $3.70, or 0.3%, to $1,211.60.
Previously, gold closed higher each day this week on concerns about financially strapped nations in the euro zone and the effects their debt problems might have on European banks. The rally was also supported by tensions between North and South Korea after the sinking of a South Korean patrol ship in March. Investors often turn to gold as a safe asset in times of economic and geo-political uncertainty.
"What is really happened is we have seen these European and Korean [concerns] fade," said one New York trader. "The markets have gotten to the point where the news hasn't gotten any worse."
In fact, global equities and the euro were helped when China said it is not reviewing its holdings of euro-zone debt and that Europe will remain one of the investment markets for China's foreign-exchange reserves. This alleviated concerns that China might dump European assets and exacerbate the euro's recent woes.
Thus, traders who previously sold into the S&P futures are now buying to offset their positions, with gold falling back as other markets stabilize, traders said.
Some selling is occurring in gold as traders exit positions for the June futures ahead of first-notice day on Friday and ahead of a long Memorial Day weekend, said George Gero, vice president with RBC Capital Markets Global Futures.
"High gold prices may deter some jewelry buyers now," Gero added. Still, the pullback has been modest, with Gero commenting that investment interest in gold continues amid some of the uncertainties.
Holdings in the world's largest gold exchange-traded fund, SPDR Gold Shares, hit another record Wednesday at 1,267.63 metric tons. However, the gain was a modest 0.31 metric ton after a rise of more than 30 metric tons the previous day.
Gold showed little reaction to early-morning U.S. economic data, with the slide in prices coming just ahead of time. U.S. gross domestic product grew 3% in the first quarter, down from the government's initial estimate of 3.2% and below the consensus forecast of 3.4%.
-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com
