Gold futures retreat from 7-day high, Greece fears support

Forexpros - Gold futures turned sharply lower on Tuesday, as investors sold positions to lock in gains after gold prices rallied to a seven-day high, while steep declines in global equity markets also added to selling pressure.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,614.05 a troy ounce during U.S. morning trade, tumbling 2.63%.

Gold prices rallied as much as 1.5% earlier as fears over an imminent Greek default remained after euro zone finance ministers postponed a decision on the release of Greece's next EUR8 billion tranche of aid until a meeting on October 17.

However, the rally prompted some investors to sell their position on profit taking and lock in gains amid speculation the CME Group planned to increase margins on gold contracts in the coming days.

Sharp drops in global equity markets also weighed, as European markets tumbled, led by a 2.8% plunge in Germany's DAX 30 Index, while the Dow Jones Industrial Average was down close to 1.5% shortly after the open on Wall Street.

Gold is considered a refuge from financial risk, but prices can tumble amid a market-wide selloff as traders sell profitable holdings to raise cash and cover losses elsewhere.

Gold prices were supported after Federal Reserve Chairman Ben Bernanke said earlier that the central bank is prepared to take further steps to support the U.S. economy.

Despite the pullback in prices, Wall Street investment bank Goldman Sachs reiterated its 12-month gold price target of USD1,860 an ounce.

"As we expect, gold prices will continue to be driven in large measure by the evolution of U.S. real interest rates and with our U.S. economic outlook pointing for continued low levels of U.S. real rates in 2012, we continue to recommend long trading positions," the bank said.

Credit Suisse also raised its 2012 gold price forecast by 19% to USD1,850 an ounce, citing 'the uncertainty and dislocations in financial markets'

Elsewhere on the Comex, silver for December delivery plunged 4.1% to trade at USD29.50 a troy ounce, while copper for December delivery dropped 1.54% to trade at USD3.102 a pound.

Credit Suisse raised its silver price forecast for 2012 by 12% to USD34 a ounce.



Forexpros - Forexpros offers a diverse set of professional tools for Forex, Futures and CFDs. These include real-time data streams, technical and fundamental analysis by in-house experts, and a widely used economic calendar and Forex News .