Demand for gold diminishes

Gold’s shine is waning as investors prefer equities

Gold was little changed in Asia after US equities extended gains for a fourth day, reducing demand for the metal as a safe investment during the global recession.

Bullion ended a five-day rally on Thursday as US equities reached a one-month high on rising company earnings and comments by economist Nouriel Roubini that the end of the nation’s recession is near. In many ways “the worst is behind us,” Roubini said.

Gold’s “risk-aversion trade has completely run its course,” Justin Smirk, senior economist at Westpac Banking Corp., said. “From now, if you want to see gold do well, it’s basically going to be doing it off the back of other commodities.”

 

Gold futures for August delivery rose $1.70, or 0.2 percent, to $937.10 in after-hours electronic trading on the New York Mercantile Exchange’s Comex unit. It fell 0.4 percent yesterday after touching a two-week high the day before.

‘Big Run’
Gold’s “had a really big run relative to other commodities this year,” Westpac’s Smirk said. “If you want to see gold really get a ‘wiggle’ on, you’re going to have to see a huge run on oil, copper and the major commodities, and really be showing there’s a huge, massive demand-pull and potential inflationary risk out there.”

The author is a Bloomberg News columnist. The opinions expressed are his own