By Claudia Assis and Nick Godt, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures fell Thursday as the flow of safe-haven buying diminished, some investors took profits following a 1.3% rally in the previous session, and a higher dollar kept the metal and other commodities under pressure.
Gold for December delivery GC1Z -0.87% lost $19, or 1.1%, to $1,663.60 an ounce on the Comex division of the New York Mercantile Exchange.
Gold went back to its “classic inverse correlation with the dollar,” and also moved in tandem with falling stocks, deflating safe-haven buying interest, said Adam Klopfenstein, a senior market strategist with MF Global in Chicago.
Investors that bought gold hoping for it to go up when equities and other assets are down got disappointed and are getting out of the trade, he said.
“We need to see gold to rally in face of equity weakness” to revert that negative sentiment, Klopfenstein added.
In addition, gold stopped $18 short $1,700 a ounce the previous session, “which could mean renewed selling by short-term oriented financial investors,” analysts at Commerzbank said in a note.
Physical demand, mainly from Asia, is likely to prevent a sharper price pullback, they said.
On Wednesday, hopes for a plan to recapitalize European banks and an expanded European bailout fund led to gains in gold and other metals.
Gold had plunged in recent weeks as worries about the euro zone’s sovereign-debt crisis grew so intense some investors sold positions in the metal to raise cash to cover bets in other markets.
Also working against gold, the euro gave ground against the dollar as the dollar index DXY +0.04% , which measures the U.S. unit against a basket of major currencies, moved up to 77.213, from 76.977 late Wednesday.
A stronger dollar makes gold and other commodities more expensive to holders of other currencies, chipping away at their appeal.
U.S. equities bounced off session lows but were still seeing red, with the financial sector the worst hit. The S&P 500 SPX -0.54% was recently off 0.7%. Read more about U.S. stock markets.
December silver SI1Z -3.11% also fell, losing $1.18, or 3.6%, to $31.61 an ounce.
Copper for the same month’s delivery HG1Z -2.23% retreated 9 cents, or 2.6%, to $3.30 a pound.
Silver and copper had rallied with gold Wednesday, with silver ending the day 2.5% higher and copper 3.1% higher.
Earlier Thursday, investors grappled with news that new applications for jobless benefits in the U.S. reflected little change in weak hiring patterns.
Initial jobless claims declined by 1,000 last week to 404,000, the Labor Department said. Read more about jobless claims.
