Gold falls from record high

The yellow metal slips as the dollar strengthens, while silver holds onto last week's 7% rally.

By TheStreet Staff Apr 11, 2011 10:37AM

Gold © Comstock Images/Jupiterimagesthe streetBy Alix Steel, TheStreet


Updated at 5:10 p.m. ET


Gold prices fell Monday as investors traded in their gold for cash at record high prices and as the U.S. dollar rallied.


Gold for June delivery settled down $6 at $1,468.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,478 and as low as $1,465.40, while the spot gold price was shedding more than $11, according to Kitco's gold index.


Investors were cashing in on gold's record rally Friday, when the metal popped 1%. Record prices might also be scaring off traders worried about buying at the top. Silver prices were less impacted, rallying early before settling flat at $40.61 an ounce, despite jumping 7% last week.


The U.S. dollar index was adding 0.3% to $75.05 in a relief rally after the U.S. government avoided a shutdown and nailed down a budget for 2011. The currency had been selling off in anticipation of a government shutdown, which helped push gold higher Friday.

Oil prices were also reversing their Friday rally as rumors circulated of a possible cease fire in Libya orchestrated by the African Union. Saudi Arabia said it would be able to produce 12.5 million barrels of oil a day if need be, further offsetting supply concerns.


Stocks struggled despite the respite from rising oil prices. The Dow Jones Industrial Average ($INDU) finished up 1 point to 12,381. The S&P 500 ($INX) fell 4 points to 1,324, and the Nasdaq ($COMPX) finished 9 points lower at 2,762.


Silver, despite being affected by the same fundamentals as gold, continued to rally above $40 an ounce. The latest bank participation report from the U.S. Commodity Futures Trading Commission showed contracts betting against silver on the Comex grew 23% since the beginning of the year, which could signal a deeper correction to come -- or the possibility of higher prices if traders buy back those positions after silver's explosive rally.


"The final verdict will be day's end," says Mihir Dange of Arbitrage when asked why silver prices weren't moving with gold. "If it doesn't correct itself out today, it will in the next coming days with either a gold rally or silver sell-off."


Some experts think investors will be reluctant to truly abandon large gold positions as a rally to $1,500 is still waiting in the wings. "Ongoing concerns of EU debt, low interest rates and ongoing inflation concern are bullish longer-term (for gold and silver) with dips to be viewed as a buying opportunity," says James Moore, research analyst at FastMarkets.


Gold mining stocks, a risky but sometimes more profitable way to invest in gold, settled lower Monday. Barrick Gold (ABX) fell 2.4% to $53.08, AngloGold Ashanti (AU) dropped 3.6% to $49.25, and Agnico-Eagle (AEM) lost 1.7% to settle at $65.54.

Newmont Mining (NEM) slipped 1.3% to $56.95 and Rangold Resources (GOLD) shed 1.6% to finish at $85.85.


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Apr 11, 2011 3:28PM
I'm tired of getting reamed by oil companies and people making money speculating.
Apr 12, 2011 12:11AM
The are two reasons (in my mind) one should own gold and silver: first, to protect themselves from the devastating effects of inflation.  From 1981-99 it made no sense to own gold and silver because we were in a TRUE low inflationary, highly productive environment.  Now we are in a polar opposite environment.  I understand that 1 quarter in 1960 would buy you a good lunch.  It will still buy you a good lunch, but in nominal terms it was 25 cents in 1960 vs. $7.50 today.  Where did the difference go? criminal bankers and politicians playing Santa Claus with our money.  There would be no need for 401Ks if we still had sound money, but the government and banks try to force people to gamble their money in the stock market, which is not an acceptable alternative because you still have to pay taxes on it and the S&P isn't even keeping up with real inflation...provided you don't put it in the wrong place and lose it, or suffer a crash.  They can tax your 401K but they can't tax money.

Second, people should buy gold and silver to force the banks and government to give back what they stole from all of us.  Opt out of the banker's paradigm and we take the control back; forcing real change in a non-violent way.  If all states made gold and silver coins legal tender it diminishes the need to own paper until we force the kleptomaniacs onto a gold standard.  Some people do very well beating bankers and government at their own game because they have the courage, skills, and associates to make it happen.  Anyone can swap out their worthless paper money for real money, fight back, and outpace inflation in the process.  The USD enslaves unless you're one of the fortunate that figured out how to escape the government / banker's paradigm early on with cash flowing assets.       
Apr 11, 2011 5:25PM















Apr 11, 2011 4:17PM
Silver- the next bubble to burst. Anybody remember the Hunt Brothers?
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