Gold creeps up to record high, padding 2010 gain

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Gold traded at record highs Tuesday as some investors and traders continued to see the metal as the best refuge from turmoil elsewhere in financial markets.

Near-term gold futures in New York closed up $4.70 to $1,244 an ounce on the Comex after reaching $1,252.10 earlier in the session. The previous closing high was $1,242.70 on May 21.

In electronic trading after the official close, however, the metal pulled back to about $1,239 amid profit-taking.

Gold has mostly been the anti-euro this year, rallying as the battered European currency has continued to fall in value against the dollar and other major rivals.

But on Tuesday gold gained even though the euro bounced from Monday’s four-year lows, rising as high as $1.201 on rumors that the Swiss National Bank was buying euros to try to blunt the recent rally in the Swiss franc (which is bad for Swiss exporters).

The euro has since pulled back to about $1.193, down from $1.194 on Monday.

“Nobody thinks euro-land’s debt problems are over with,” said Frank Lesh, a futures analyst at FuturePath Trading in Chicago. “We haven’t seen the lows in the euro, and we haven’t seen the highs in gold.”

Matt Zeman, metals trader at LaSalle Futures Group in Chicago, also figures the euro will keep dropping as austerity measures further slow the European economy.

But he cautions that gold will continue to be vulnerable to abrupt sell-offs that might seem counterintuitive. For example, gold slid 4.2% the week of May 17 even as U.S. stocks slumped, with the Standard & Poor’s 500 also dropping 4.2% that week.

Given the metal’s strength this year, investors and traders who are forced to meet margin calls when stocks or other securities dive may temporarily turn to sell gold to raise cash, Zeman warned.

“People may be forced to liquidate [gold], even though they don’t want to get out,” he said.

As for the latest record high, he said he preferred to wait for another pullback to buy.

Still, Lesh believes that investors increasingly regard gold as a currency that has a much better chance of holding its value over time than most of the paper alternatives.

“A lot of people don’t care if they’re not making money, they just don’t want to lose it,” Lesh said.

Gold owners are doing a lot better than that: The metal is on track to gain for a 10th year in a row, up 13.6% year to date compared with a 5.5% drop in the S&P 500.

-- Tom Petruno