Gold falls off record $1917 as investors fear bubble
Published 24/08/2011 | 05:00
GOLD dropped for the first time in seven sessions as some investors sold the metal after signs of slowing growth spurred a rally to a record $1,917.90 an ounce.
The relative-strength index of futures in New York has topped 70 since August 8, a signal to some investors that prices were poised to decline.
Bullion has jumped 14pc in August amid speculation that Fed chairman Ben Bernanke will signal further measures to stimulate the US economy later this week and as debt crises spurred demand for haven assets.
"Gold looks very bubbly," Matt Zeman, a strategist at Kingsview Financial in Chicago, said. "It's going to continue to suck everybody in. There's too much risk of a wicked correction lurking around the corner to enter the trade right now."
Gold futures for December delivery fell $33.30, or 1.8pc, to $1,858.60 on the Comex in New York. The metal for immediate delivery declined as much as 2.5pc after touching a record $1,913.50 in London.
Before yesterday, prices surged 17pc in three weeks. The metal is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify their holdings away from equities and some currencies. Bullion also reached all-time highs in euros, British pounds and Swiss francs yesterday.
UBS raised its one-month gold forecast to $1,950 from $1,725 and increased its three-month outlook to $2,100 from $1,850. (Bloomberg)