Gold plummets on profit-taking

Gold plummets on profit-taking
March 4, 2008 3:38 PM ET
Source: MSN Money

NEW YORK (AP) – Gold fell sharply Tuesday after crude oil retreated and traders cashed in profits following the metal’s flirtation with the historic $1,000 mark. Silver and copper also declined.

Other commodities fell across the board, with corn, wheat, soybean and energy futures all trading lower in a broad futures sell-off.

Gold has gained more than 15 percent this year, driven up by record high oil prices, steep declines in the dollar and worries about a U.S. recession. The most-actively traded April contract hit an intraday high of $992 an ounce on Monday — a record high and just shy of the psychologically important $1,000 barrier.

Gold’s failure to breach the $1,000 mark triggered a sell-off, sending the metal $17.90 lower to settle at $966.30 an ounce Tuesday on the New York Mercantile Exchange. Gold fluctuated widely, trading as high as $990.30 and as low as $958.30.

“Inability to keep the $1,000 level worried latecomers to the party,” George Gero, vice president with RBC Capital Markets Global Futures, said in a note. “However, past sell-offs turned out to be a buying opportunity.”

Other precious metals also fell Tuesday. Silver for March delivery fell from a 27-year high to settle at $19.738 an ounce, down 33.5 cents on the Nymex. Coper for March delivery slipped 110.4 cents to settle at $3.8270 a pound.

Gold has been on a meteoric rise, soaring nearly 32 percent in 2007. The decline of the 15-nation euro has been a strong driver of the metal, which is viewed as a safe-haven investment in times of rising inflation and economic instability. The euro traded at $1.5209, up from $1.5192 late Monday in New York.

A weak dollar encourages investors to shift funds into hard assets like gold, which are known for holding their value. It also makes dollar-denominated commodities like gold cheaper for overseas buyers.

Gold’s fortunes also have been closely linked to crude oil, which fell below $100 Tuesday on the possibility that OPEC will boost production and on expectations that crude inventories are continuing to rise.

“Oil is definitely a part of (gold’s decline). If you had seen oil go to $107, you would have seen gold hit $1,000. It’s prima facie evidence of where funds are putting their money,” said Jon Nadler, analyst with Kitco Bullion Dealers Montreal.

Light, sweet crude for April delivery fell $2.93 to settle at $99.52 a barrel on the Nymex after dropping as low as $98.87 earlier. It was crude’s first move below the $100 mark this week and its lowest settlement price since Feb. 25.

Prices rose as high as $103.95 Monday, climbing past the $103.76 price many analysts consider to be the true record high for oil.

Other energy futures also fell Tuesday. April heating oil futures fell 4.9 cents to settle at $2.7918 a gallon on the Nymex, while April gasoline futures dropped 14.29 cents to settle at $2.5291 a gallon.

In agriculture markets, corn and soybeans plummeted a day after hitting record-highs on expectations of growing global demand amid dwindling stockpiles.

Soybeans for May delivery dropped 48.75 cents to settle at $15.1075 a bushel on the Chicago Board of Trade, while March corn lost 12.5 cents to settle at $5.43 a bushel. Wheat, meanwhile, fell 15 cents to settle at $10.875 a bushel on the CBOT.

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