Tags: Gold | Luster | recovery | US

FT: Gold Losing Luster Amid U.S. Recovery

Friday, 23 March 2012 08:09 AM

Gold is losing its luster now that the U.S. economy appears to be on firmer footing, experts say.

Gold prices have fallen 9 percent since February, hitting a 10-week low of $1,627.68 per ounce, the Financial Times reports.

Meanwhile, yields on U.S. Treasury bonds have risen as well, a sign investors want out of the safety of U.S. debt and precious metals and into riskier but more rewarding assets like stocks.

Bond yields rise when stock prices fall.

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"Sentiment towards gold is as low as it has been for many years, possibly since the rally started," Kamal Naqvi, head of commodity investor sales at Credit Suisse, tells the Financial Times.

"For virtually the first time this cycle, buying gold is a contrarian trade."

Expect gold to continue falling, other experts say, possibly as low as $1,550 an ounce — a 20 percent drop from September’s high of $1,920.

"Investors are not using this [price correction] as an opportunity to buy cheaper gold," Edel Tully, precious metals strategist at UBS, the FT adds.

"Instead, more are looking at the potential to short it."

Stocks meanwhile, have been on the rise, with the S&P 500 broad index climbing above 1,400 recently.

"Investors are looking at other investment options, as they are less concerned about economic growth and more wanting to hop on the equity rally, which clearly works against some of the reasons why people buy gold," says Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong, according to Reuters.

Gold often rises on inflationary concerns. In 2001, gold was trading a little over $250 an ounce.

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