Gold’s hot streak goes cold as sellers swarm

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The sell-off in gold picked up steam Tuesday as some global investors ran back to the dollar, the metal’s nemesis.

With the end of the year approaching, some investors also may be figuring it’s a logical time to book some of their gold profits and wait for a better buying opportunity, traders say.

In New York, near-term gold futures dived $20.60, or 1.8%, to $1,142.80 an ounce -- the lowest closing price since Nov. 19. The metal has tumbled $74.60, or 6.1%, since reaching a record high of $1,217.40 on Thursday.

Gold’s powerful run-up since October stalled out Friday, after a surprisingly upbeat U.S. employment report for November raised the prospect of rising interest rates. That drove up the dollar.

The news Tuesday might have been expected to spark fresh interest in gold: Greece’s bond rating was cut to BBB-plus from A-minus by Fitch Ratings, which cited concerns about the government’s finances and debt load amid a deep recession.

Fitch’s move helped fuel selling in many foreign stock markets. Greece’s main share index sank 6%. The Spanish market slid 1.7%. And Dubai, which has its own debt troubles, saw its stock market plummet 6.1%, wiping out nearly all of its remaining year-to-date gain. U.S. stocks also lost ground.

But instead of fleeing to gold, many investors and traders piled back into the perceived safety of the dollar. The DXY index of the dollar’s value against six major foreign currencies rose 0.6% to 76.20, a five-week high.

It helped the dollar that the Treasury easily sold $40 billion of new three-year notes at an annualized yield of 1.22%, slightly below expectations. Greece may have trouble selling debt, but Uncle Sam still can borrow with abandon.

Some traders say gold was overdue for a pullback after climbing, with few interruptions, from the $950 level in late August.
“Every time you turned on the TV somebody was pitching gold,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “Everybody and their mother had jumped on the bandwagon.”

Larry Young, a senior trader at Infinity Futures in Chicago, said he sensed that some clients who have made big money in the metal this year -- gold started the year at $884 an ounce -- were happy to book their gains and head to the sidelines for now.

‘They’re locking it up for the year,” he said.
-- Tom Petruno

Genaro Molina / Los Angeles Times