Euro moves takes shine off yellow metal
SEATTLE - Gold futures fell the most in two weeks as the euro's rebound reduced demand for the precious metal as a haven against European debt concerns.
The euro was headed for the third straight weekly gain after topping $1.30 for the first time since May 10. Gold rose to a record $1,266.50 an ounce on June 21 and surged to all-time highs in euros, sterling and Swiss francs last month amid Europe's fiscal crisis.
"There's continued unwinding of the gold-euro trade," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "As the euro firms up, the risk premium comes off."
Gold futures for August delivery fell $20.10, or 1.7 percent, to $1,188.20 on the Comex in New York, the biggest drop for a most-active contract since July 1. The metal lost 1.8 percent this week.
Gold historically has moved in tandem with the euro as an alternative to the dollar. This year, as Europe's sovereign-debt woes unfolded, investors sold euros and bought gold and dollars as stores of value.
"Gold in euro terms may now be a broken trade," said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. Earlier this year, he recommended holding gold priced in other currencies.
Precious metals with wider industrial applications fell on signs that the US economic recovery is slowing, eroding demand for raw materials.
Bloomberg News
(China Daily 07/20/2010 page17)
