Gold Prices Plummet as Stock Market Rally Continues

Strategic Insights -

A sharp sell-off in gold futures Thursday was triggered by the unwinding of safe-haven positions in the metal, as traders moved funds from a sector that is not performing to one that seems to be performing. The stock market rally continues, with the Dow Jones Industrial Average climbing back above 8000 for the first time in nearly two months. The metal's price fell by $18.80 to $908.90 an ounce, with some analysts attributing the decline to a drop in gold's safe-haven appeal as the economy and stock market show signs of improvement.

Key Takeaways:

  • The stock market rally has led to a sharp sell-off in gold futures, with June gold falling $18.80 to $908.90 an ounce.
  • Traders are unwinding safe-haven positions in gold as they move funds to sectors that are performing well, such as the stock market.
  • George Gero, vice president with RBC Capital Markets Global Futures, noted that people who had gone into gold as a safe haven during more turbulent waters tend to get out of gold when they are feeling more confident about the economy and direction of the stock market.
  • The Dow industrials Thursday hit a 8075.65 high, up 25% from the March 6 low, contributing to the decline in gold prices.
  • Craig Ross, vice president of ApexFutures.com, pointed out that gold has tumbled despite moves in two other markets that normally favor the yellow metal - a weaker dollar and stronger crude oil.
  • The International Monetary Fund has announced it will not sell any further gold beyond the 403.3 metric tons already announced, which are subject to congressional approval.
  • June gold broke down below the roughly $910 area, near the low from early in the week and an uptrend line through the November and March lows, providing key support areas at around $893 and $885.
  • Comex silver held up better than gold, with May silver settling up 5 cents to $13.025, due to its greater use as an industrial metal.
  • Platinum group metals, such as July platinum and June palladium, benefited from the improved tone in equities, Gero said.

Statistics:

  • June gold fell $18.80 to $908.90 an ounce.
  • The Dow industrials Thursday hit a 8075.65 high, up 25% from the March 6 low.
  • May silver settled up 5 cents to $13.025.
  • July platinum rose $22 to $1,165.80 an ounce.
  • June palladium gained $1.20 to $222.80 an ounce.

Sources:

  • Dow Jones Commodities News via Comtex, Apr 02, 2009.
  • George Gero, vice president with RBC Capital Markets Global Futures.
  • Shawn Hackett, president of Hackett Financial Advisors.
  • Craig Ross, vice president of ApexFutures.com.
  • International Monetary Fund.