Gold Futures Drop From Record in New York After Longest Rally in 31 Years
Gold futures fell from a record $1,610.70 an ounce on investor sales after the metal’s longest rally in 31 years.
Before today, the price rose 6.6 percent this month as European and U.S. debt concerns boosted the appeal of the precious metal as a haven. The 14-day relative strength index for gold topped 70 yesterday, a signal that prices may fall.
“This is a market that, on a short-term basis, is extremely overbought,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “There are a lot of people chasing gold, but I’d be a bit leery buying at this level just because of the amount of ground it’s covered in such a short time.”
Gold futures for August delivery fell $1.30 to settle at $1,601.10 at 1:40 p.m. on the Comex in New York. The metal gained in the previous 10 sessions, the longest rally since January 1980.
The price slumped as much as 1.1 percent to $1,585.20 after the settlement.
Gold has climbed 13 percent in 2011 amid escalating debt woes in the U.S. and Europe. Futures posted gains in the past 10 years.
European leaders are meeting July 21 to discuss a second bailout for Greece. The Treasury Department has warned the U.S. debt ceiling must be lifted by Aug. 2 to avoid default. Standard & Poor’s and Moody’s Investors Service may downgrade the government’s credit rating if Congress doesn’t act.
The dollar has dropped almost 5 percent this year against a basket of major currencies.
‘Meltdown’
“The uncertainty looming over the markets is on such a large scale,” Zeman said. “We’re talking about a meltdown if the U.S. defaults, so the dollar will continue to weaken and boost gold.”
Silver futures for September delivery fell 12.1 cents, or 0.3 percent, to $40.221 an ounce. On April 25, the price reached $49.845, a 31-year high.
Palladium futures for September delivery rose $3.70, or 0.5 percent, to $798.30 an ounce on the New York Mercantile Exchange. Platinum futures for October delivery increased 90 cents to $1,776.30 an ounce.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
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