GoldGold ended flat Friday after an early rally to record highs fizzled, but the metal posted its fourth straight weekly increase as jittery investors fretted that a $1-trillion (U.S.) European rescue could be too late to contain debt contagion.
Bullion prices jumped early in choppy trade, then dropped. The slump deepened as investors sold gold to cover losses in sliding equities, commodities and crude oil markets, traders said.
"There is some margin-related selling in gold triggered by losses in other assets. And the technical indicators are very high, it's not surprising that we would have consolidation today," said Bill O'Neill, partner of New Jersey-based commodities firm Logic Advisors.
Mr. O'Neill cited a rise in the relative strength index for gold's weakness. Gold's RSI rose to above 70 this week - considered an overbought signal by technical analysts.
Sales of European and U.S. coins, bars and exchange-traded gold funds surged this week, and open interest in Comex futures rose to an all-time high on Thursday.
Spot gold fell as much as 2.4 per cent from its earlier record high of $1,248.95 an ounce, and was at $1,230.05 an ounce at 3:59 p.m. ET, down slightly from $1,231.83 late in New York on Wednesday.
U.S. gold futures for June delivery on the Comex division of the New York Mercantile Exchange settled down $1.40 at $1,227.80.
Gold investors cashed in gains as U.S. stock markets fell more than 2 per cent, oil tumbled 4 per cent and base metals fell sharply.
"There are losses being made in various places, and potentially there is a need to lock in some profits to offset some of the losses being created in commodities generally... and in other sectors," said Saxo Bank senior manager Ole Hansen.
"When you start to see other sectors start to give way as we've seen here, that will have a natural spillover effect."
Gold's last foray above $1,200 an ounce in December was quickly followed by a hefty correction. Prices dropped as much as 5 per cent the day after hitting a then-record $1,226.10.
Gold coin demand in Europe and the United States surged this week, with the U.S. Mint on track to post its highest monthly sales year to date for the popular American Eagles coins.
On Friday, the U.S. Mint data showed American Eagle one-ounce gold coins totalled 72,500 ounces so far in May, exceeding 60,500 ounces in the entire month of April.
Physical gold products such as coins and bars are traditionally a safe haven for anxious investors in times of economic and geopolitical crises.
Investment interest in physical gold was strong, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, at a record high 1,209.5 tonnes on Thursday.
The fund's reserves have risen 68.5 tonnes or 6 per cent in the last four weeks. The SPDR ETF is the world's sixth largest holder of gold, ahead of Switzerland, China and Japan.
Safe-haven buying is seen continuing to buoy gold prices, their current correction notwithstanding.
SilverSilver tracked gold lower to $19.25 an ounce against $19.41. PlatinumPlatinum was at $1,713.50 an ounce against $1,731.50 and palladiumpalladium at $525.50 against $537.
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