Gold could be
losing its label as a safe-haven asset.
Considered a good
bet during times of political and economic uncertainty, gold caught some
analysts and traders off guard when prices in the spot market slumped over 3% on
Tuesday, posting only a small rebound in European trading on
Wednesday
“I find that
surprising given the timing as we move into an extremely uncertain period over
the next two or three weeks,” said Robert Rennie, chief currency strategist at
Westpac Bank in Sydney
Some traders had
anticipated gold to benefit from higher demand for traditional safe-haven
assets. Market reaction to the U.S. government
shutdown on Tuesday
was muted, with stocks
there rising
slightly. Investors pointed to more uncertainty around the chances of a
prolonged shutdown hurting the wider economy, or if it threatens a solution on
the U.S.
Others say the
sell off is in line with history, finding a correlation between the length of the
shutdown and how much
the gold price goes up.
Spot gold prices
had touched a record $1,920.94 a troy ounce in September 2011 after Standard
& Poor’s had cut the U.S. credit rating following months of debate over
raising the country’s debt ceiling.
As of 0815 GMT,
spot gold was trading at $1,292 a troy ounce, up $4.50, or 0.3%, from its
previous close.
Some analysts said
that the current selling in gold has more to do with technical indicators than
fundamental issues. Traders usually have predetermined levels programmed in
their computers that triggers sell orders when the price reaches a particular
level.
The fall in gold
prices below the $1,300 a troy ounce mark is “never really good for confidence,”
said Stan Shamu, a strategist with IG in Melbourne
Besides, Mr. Shamu
says physical demand, which had helped to prop up prices at times, is missing
with the world’s two biggest buyers—India and China
Analysts expect
prices could fall, before starting to rise as the Oct.17 deadline to raise
U.S.
source: wsj
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