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Gold, little changed, may rise as investors seek haven assets

Gold futures, little changed in New York, may rise on speculation that US equity markets will be increasingly volatile after the worst sell-off in four years, boosting the metal's appeal as a haven asset.

Gold is up 5.6% this year, outperforming other haven assets such as bonds. The benchmark 10-year US Treasury returned 1.7% this year. The Dow Jones Industrial Average plunged 3.3% on February 27 and had dropped 3.5% this week. “You're seeing people come in and buy the market at these prices,” said Daniel Vaught, a commodity analyst at A.G. Edwards Inc. in St. Louis. “The volatility in equities is going to renew safe-haven buying in gold and precious metals.”

Gold futures for April delivery rose 70 cents to $673.20 an ounce at 10:19 a.m. on the Comex division of the New York Mercantile Exchange. Prices earlier touched $680.20. To be sure, some analysts said gold may fall because the widening fluctuation in prices will increase the perceived risk of precious metals and discourage new investment. Gold is down 2.1% this week. The historical volatility of gold futures, or the rate at which a price moves up and down, was at 26% in the past 10 days, compared with 15 two weeks ago.

The Dow had a historical volatility of 18. “It's a little too volatile to commit to anything,” said Nick Ruggiero, a gold trader at Eagle Futures Inc. in New York. “If people are hesitant about stocks, they're going to be even more hesitant about gold and the metals.” A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. (Bloomberg)