MW: Gold futures drop nearly 5% to trade below $1,800
Metal trades below $1,800 an ounce as investors book profits
By Claudia Assis and Chris Oliver, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures dropped nearly 5% Wednesday to trade below $1,800 an ounce , extending losses to a second day as a correction that started after five records in six sessions got much steeper.
Gold for December delivery GC1Z -4.74% dropped $86.30, or 4.6%, to trade at $1,775.50 an ounce on the Comex division of the New York Mercantile Exchange.
The contract fell $30.60 Tuesday to end at $1,861.30 an ounce. Gold last hit a settlement record on Monday, when it finished at $1,891.90 an ounce.
Investors booked their profits after the failed attempt at conquering $1,900 an ounce, said analysts at VTB Capital in London.
“Profit-taking is only natural after the pretty much unstoppable rally this year,” they said.
Gold has gained almost 25% from lows in early July, with most analysts forecasting $2,000 an ounce in a matter of weeks and large banks such as Citigroup and UBS upgrading their price forecasts.
“A small easing in global risk aversion and a more or less calm week following the recent volatility (with few significant macro events expected until Friday) finally triggered some book squaring as investors rushed to fix profits,” the VTB analysts noted. “In this respect, we still do not see a pronounced pullback or sustained losses here.”
Markets are waiting to hear from Federal Reserve Chairman Ben Bernanke, who is scheduled to speak at a gathering of central bankers in Jackson Hole, Wyo., on Friday. At last year’s gathering, Bernanke announced a second round of quantitative easing.
Earlier Wednesday, investors grappled with news Moody’s Investors Service cut Japan’s government debt to Aa3 from Aa2 with a stable outlook, citing the country’s large deficit and cumulative increase in government debt since 2009.
Meanwhile, silver tracked gold lower, with the September contract SI1U -4.78% down $2.22, or 5.2%, to $40.10 an ounce.
Copper bucked the negative trend. The metal’s September contract HG1U +0.43% added 2 cents, or 0.4%, to $4.01 a pound.
