Gold Investors Wait Out Year-End “Clutter”

by LAURA CLARKE, The Wall Street Journal  |  published on December 23, 2012

Gold
Spot gold prices may have been caught in the crossfire of a broad-based metals slump Thursday, but the yellow metal’s outlook for next year appears far rosier than that of its peers, say analysts.

In the past few weeks, gold has been embroiled in an identity crisis, caught between serving as a traditional safe-haven investment and acting as a risk-related asset, in which case it benefits from positive wider economic sentiment.

Thursday saw the metal slump on at times conflicting signals that rattled nervous and seasonally illiquid markets and caused investors to ignore more optimistic longer-term outlooks for gold prices.

Bullion prices tumbled to four-month lows with long positions liquidated as a positive reading on U.S. gross domestic product heightened concerns about how long the Federal Reserve will stick with its third round of quantitative easing, which is viewed as positive for bullion in its capacity as a hedge against liquidity-induced inflation and currency debasement. At the same time and somewhat paradoxically, concerns over the stalling U.S. negotiations on averting the fiscal cliff also weighed on gold. Those factors all combined to send the metal below key support levels and trigger technical selling in a holiday-thinned market, traders said.

Spot gold fell 1.2% over the day to $1,647.37 a troy ounce, while silver tracked the decline, sinking 3.5% to $29.926. Both metals have since steadied amid consolidation, and were treading water Friday.

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