On Tuesday, gold fell to its lowest price since April, while investors became more positive about the worldwide economy and taking risks. Gold futures scheduled for August delivery fell 2.1 percent to $1,158 per ounce. Gold reached a record high of $1,257.20 per ounce on June 18 and is now priced at $1,162.59 per ounce.
During the first half of 2010, the price of gold saw a 13.7 percent jump, amidst fears of a European financial system collapse. The debt crisis faced by the European government seems to have abated and recent European economic forecasts are much brighter. This has boosted the euro from its four-year low, at the detriment of gold.
At the same time, some investors have rejoined the stock market in the U.S. due to numerous positive corporate earnings reports. The Dow Jones industrial average was up 7.7 percent for July, as of Monday. According to commodities trader William O’Neill, an employee at NJ-based Logic Advisors, “There’s more of a risk appetite now.”
There has been a recent liquidation of gold holdings by short-term traders. These individuals feel that the gold rally has stalled for the time being. True believers in gold feel that the precious metal is the only safe haven from governmental devaluation of currencies. They believe that investors will look to gold as inflation rises due to the mass printing of money designed to rescue global economies.
John Hathaway, manager of the multi-billion dollar Tocqueville Gold Fund, is one of these true believers. He does not believe that the gold bubble will burst in the near future and encourages investors to continue to purchase the precious metal. According to Mr. Hathaway, “One must distinguish between a near-term overbought condition, to which any investment class in a secular bull market can become prone, versus a full scale mania. We are a long way from silly season when it comes to gold.”
Source: Petruno, Tom. Los Angeles Times. Gold falls to three-month low as economy jitters fade.
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