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)